The Best U.S. States for New Teacher Retirement Benefits
There are lots of factors that new, prospective K–12 teachers have to consider when entering the education workforce. People typically pay the most attention to things like salary, location, and health insurance benefits, but what U.S. States are the best for new teachers looking for secure retirement?
Retirement benefits are a unique form of compensation in that they are deferred compensation. It is straightforward to compare the salaries offered to teach in one county versus another, or even to look at the health insurance benefits (medical plus dental? plus vision?) offered by one school district versus another. But comparing retirement plans on a state-by-state basis is a more difficult because there is no intuitive way to understand the value of one pension plan versus another, or whether a hybrid plan or defined contribution (DC) plan might be more valuable.
This article provides a ranking of states based on the quality of retirement benefits that they offer to new teachers entering the workforce in 2022-23, first published in Special Report #3 of the Retirement Security Report Teacher Edition.
The Top 10 / Bottom 10 States by Average Quality of Retirement Benefits for New Teachers
- South Carolina (94.2%)
- Tennessee (88.2%)
- South Dakota (78.7%)
- Oregon (78.6%)
- Michigan (75.3%)
- Washington (74.4%)
- Rhode Island (73.9%)
- Florida (73.7%)
- Hawaii (71.0%)
- Virginia (70.7%)
- Illinois (49.7%)
- Mississippi (49.6%)
- Alabama (49.1%)
- New Jersey (48.0%)
- Nevada (47.1%)
- Georgia (46.2%)
- Wisconsin (46.1%)
- Kentucky (46.1%)
- Texas (44.9%)
- Louisiana (33.8%)
The score shown for each state is the percentage of available Retirement Benefits Score points that the retirement system averages overall for all open retirement plans available to public school teachers for the 2022-23 school year.
How States are Ranked
Our approach to ranking states is to grade each retirement plan offered to public school teachers based on the quality of benefits offered to three groups of people: those who are only going to teach for 10-years or less (“short-term” teachers), those who are going to spend 10-20 years in the classroom (“medium-term” teachers), and those who will teach in K–12 education for their entire lives (“full career” teachers).
This ranking includes all types of retirement plans for teachers, including “pension” plans, “defined contribution” plans, “guaranteed return” (or “cash balance”) plans, and “hybrid” plans that blend together various elements from the first three plan types.
While most teachers do not make their job decisions based on the retirement benefits being offered, today’s workforce is highly mobile and very much in flux. It is easily conceivable that someone who is getting their teaching certificate or finishing up an education program or considering changing professions might have some flexibility in where they want to go to work.
States Ranked by Best Retirement Plan Available to New Public School Teachers
|wdt_ID||Rank||State||Best Plan Available (Design Type)||Overall Retirement Benefits Score||"Short-Term" Teacher Score||"Medium-Term" Teacher Score||"Full Career" Teacher Score|
|1||1||South Carolina||DC Plan (Pension Option Available)||94.20%||86.20%||96.40%||100.00%|
|7||5||Michigan||DC Plan (Hybrid Option Available)||75.30%||58.30%||67.70%||100.00%|
|10||6||Washington||Pension (Hybrid Option Available)||74.40%||52.20%||72.60%||100.00%|
|13||8||Florida||DC Plan (Pension Option Available)||73.70%||66.50%||63.00%||91.80%|
(1) “Pension” means a defined benefit pension plan, “DC plan” means a defined contribution plan, “GR plan” means guaranteed return plan (or cash balance plan), and “Hybrid” means a hybrid plan that combines elements of pension, DC, and/or GR plans.
(2) Different retirement plan designs (pension, DC, guaranteed return, hybrid) have different available Retirement Benefits Score points, given the underlying variance in the kind of provisions offered by each plan design. The percentages shown are the percentage of available Retirement Benefit Score points.
(3) The following states offer multiple plans to teachers who must make a choice which they want to join: Florida, Indiana, Michigan, Ohio, Pennsylvania, South Carolina, Utah, Washington.
(4) The following states show average scores for a statewide teacher plan and separately managed municipal teacher plan: Illinois, Minnesota, Missouri, New York
(5) Colorado has separate pension plans for Denver Public Schools and all other state school districts, but both plans are managed by the same state administrative organization.
(6) Nevada has two pension plan designs with different contribution rate structures. In most school districts the employer decides which to offer, but in some places employees have a choice.
(7) Rhode Island has different hybrid plan tiers of benefits based primarily on whether or not an individual is enrolled in Social Security.
(8) Texas has two pension plan designs that new members can join that differ slightly in their provisions based on the previous state employment history of the individual.
What All of This Data Means for Teachers
Many of the lowest scoring retirement plans for teachers are those that were created in the years following the Great Recession.
While some states replaced their pension plans with lower-risk alternative plan designs that offered comparable benefits, others simply reduced the value of pension benefits offered to new teachers. The net result is that the value of pension benefits today are roughly $100,000 less than they were in 2005, a 13% decline over the past two decades.
Teachers who were already hired before states began creating new tiers of benefits with less value will still retire with the benefits they were promised. This means the benefit value reduction is going to be felt primarily by new generations of teachers.
All of the new pension plans and benefit tiers were put in place as part of a wave of legislation to reduce costs and the risks to taxpayers from future investment shortfalls. These goals are understandable in the context of economic recession and financial volatility. And in the years since as teacher pension plans have accumulated over $600 billion in pension debt — i.e., unfunded liabilities — the costs of paying this down have become an acute burden for states and school districts.
But the state legislatures who chose to continue offering pension benefits only through a lower valued tier of benefits have effectively shifted the costs of their legacy retirement plans on to educators. By cutting the benefit values for future teachers, states are forcing those individuals to find additional ways to use their salaries to save for retirement independent of the state retirement system. The best U.S. States for new teachers do not put teachers in this position.
Details & Methodology Notes
Our ranking approach starts by grading each teacher retirement plan using Retirement Security Report methodology. This assigns a Retirement Benefits Score to each plan based on how well they are serving short-term teachers, medium-term teachers, and full career teachers. We blend those scores together to get an average overall score for each retirement plan. And that is what is used to determine the score for each state.
If a state only has one retirement plan that is open to enrolling new teachers, then the score for that retirement plan is the score for that state. If a state has multiple retirement plans available for new teachers to join, then we calculate the average score of those plans, and that is the score for the state.
Using this approach, the best state in the country for new teacher retirement benefits is Tennessee. Their hybrid plan for teachers serves all members well, including earning 100% of available Retirement Benefits Score points for full career teachers and 77.9% of available points for short-term teachers.
For states like Tennessee, South Dakota, or Oregon, the score for the one hybrid plan that they have available for new teacher is how we’ve ranked the state itself. For states like Pennsylvania and Michigan, each of which offers the choice of a hybrid retirement plan or defined contribution plan, we’ve averaged the scores for those plans to come up with a ranking for the state itself.
An example of how this works is South Carolina. They offer teachers the choice of a pension plan or defined contribution plan. The defined contribution plan on its own is actually the highest scoring teacher retirement plan in the country, but the South Carolina pension plan does not get very good scores. The average of those two puts South Carolina in fourth among the states with 78% of available points scored — 10% percentage points below Tennessee.
In cases where a state has a plan for teachers that is intended to be supplemental to primary retirement benefits or is only offered to part-time teachers, we do not include that in the state’s average. We also do not include retirement plans that are only offered to non-certified public school employees or plans exclusively for higher education employees.
Introducing the Retirement Security Report Teacher Edition
On June 28th, Equable Institute issued the Retirement Security Report Teacher Edition (2022). The report builds on The Retirement Security Report (RSR) initiative launched last year that evaluated the quality of retirement benefits offered to public workers nationwide using Equable’s Retirement Benefits Score methodology for all 335 statewide retirement plans currently open to new hires at that time.
The Teacher Edition of the report is an in-depth look at the 316 retirement plans currently offered to teachers and non-instructional staff in the U.S., including those offered to new hires and legacy plans with active enrollees – adding more than 200 plans to both our benefits database and interactive retirement security scorecards. The resulting omnibus analysis is comprised of four papers – a summary report and 3 special reports – that illuminate the state of teacher retirement benefits today.
Summary Report: “The National Landscape of Teacher Retirement Benefit Security”
The National Landscape of Teacher Retirement Benefit Security provides an overvie of teacher retirement benefits in America. The paper highlights the trends in the value of pension benefits, evaluates how well teachers are being served by the retirement plans offered to them based on plan type, and other key trends and analysis that are further expanded upon in the three special reports.
Special Report #1: “The Fading Value of Teacher Retirement Benefits in America”
Special Report #1 looks at historical trends in the value of teacher retirement benefits. Analyzing lifetime benefit values going back to 1965, the report shows teachers today enrolled in a pension will earn 13% less in retirement than a teacher hired before the Great Recession. The report also evaluates similar trends in value for other retirement plan types.
Special Report #2: “The Best U.S. States for New Teacher Retirement Benefits”
Special Report #2 ranks states by the quality of their retirement benefits offered to new teachers using Equable’s Retirement Benefits Score methodology. The report offers two rankings: The first based on the best-scoring plan offered to teachers in each state and the second based on the average score for all plans.
Special Report #3: “Important Elements of Quality Teacher Retirement Plans”
Special Report #3 analyzes the design elements of the top-scoring plans in the Retirement Security database. The paper illuminates the best practice in plan design that help to ensure retirement income security for teachers.
In the coming days and weeks, we will be highlighting key findings and more data from the Retirement Security Report Teacher Edition. Visit equable.org/rsr to read more RSR content and learn more about the initiative.
About the Retirement Security Report
The RSR is a universe of in-depth research, interactive tools, policy scores and other resources to shed light on the quality and value of retirement benefits for all public workers. All RSR projects are based on data from our comprehensive benefit database of retirement plans offered to public workers and use an open-source scoring methodology that accounts for three primary criteria: Eligibility, Income Adequacy (based on a 70% pre-retirement income replacement rate), and Flexibility & Mobility.
Oklahoma House Bill 2486: Retirement Security Policy Scores
Oklahoma is considering changes to retirement plan provisions for its Public Employees Retirement System (OPERS), as presented in House Bill 2486 (HB2486). The stated intent of the legislation is to help improve the government’s ability to recruit public employees. The state House adopted HB2486 on March 28, 2022. A committee in the state Senate amended HB2486 on April 4, 2022.
Equable Institute has analyzed the proposed changes by both the Oklahoma House and Senate using our Retirement Security Report methodology. We have published scorecards for each version of HB2486 that compares the how the proposed changes to retirement benefits would influence current and/or future OPERS plan members. The scorecards can be downloaded at the links below. Scroll down in the article for our complete analysis of the benefit provisions of the proposed legislation.
KEY POLICY CHANGES IN HB2486:
- The legacy defined benefit pension plan that OPERS manages for members hired before November 2015 would be re-opened for all current members and new OPERS members (the legacy pension plan was closed by the legislature to new hires back in 2015).
- Anyone enrolled in the OPERS defined contribution plan would have their individual account balances closed and be converted into pension plan members.
- The Senate amended version of HB2486 would keep open the OPERS defined contribution plan and increase employer contribution rates.
- The minimum employer rate would rise from 6% of salary to 8%.
- When members themselves make contributions above 7% of salary, this triggers and employer match. The employer match on member contributions would jump from 7% of salary to 10%.
WHAT HOUSE BILL 2486 MEANS FOR WORKERS:
House: OPERS members would be no longer be offered a defined contribution plan and instead be enrolled in a defined benefit pension plan with lower overall benefits, but guaranteed income.
Senate: OPERS members would be offed a defined contribution plan that serves all members well, on average. There would be no option to select a pension instead.
We use a Benefits Score methodology that measures the future income value of retirement plans and compares this to a 70% “replacement rate” income adequacy threshold.
The tables above show the proposed plan’s total Benefit Scores, e.g., the percentage of available points for a given category. We also show how proposed changes would improve or decrease the Benefits Score of the current plan (the“score change”). And we show what the material effect would be on an average employee’s annual retirement earnings, using salary assumptions used by OPERS trustees.
For OPERS Members: The changes that HB2468 would mean are relatively similar for all OPERS members, but there are slight differences in the degree of change depending on if a member is classified as Regular, Hazardous, or Elected. To understand what HB2468 might mean for you based on your job classification or age of entry into the public workforce, see a detailed breakdown at the end of this article.
EQUABLE INSTITUTE’S ANALYSIS OF HOUSE BILL 2486:
The proposed pension plan included in the House adopted version of HB2486 would provide substantially lower benefits to most OPERS members compared to the current defined contribution plan. This is primarily because the OPERS pension plan has no built-in inflation protection or crediting interest rate. However, the the proposed improvements to the OPERS defined contribution plan under HB2486 as amended in the state senate would increase retirement benefits for all members.
Pension plans are valuable because they can reduce investment risk for members, but the underlying benefit design provisions matter. For OPERS, the current defined contribution plan’s benefits are notably better than the legacy pension plan that HB2486 proposes to re-open. If the house adopted version had proposed a pension plan for current and new members with stronger benefit design provisions, then it is possible that the Retirement Benefits Scores would have exceeded the current plan.
The proposed changes in the Senate amended version are notably better than the version of HB2486 passed out of the House. That version would have reduced benefits for most members of OPERS, in exchange for the benefits provided being guaranteed income. Whereas the Senate version increases the value of retirement benefits for all members.
Assessing the Legislative Goals on Recruiting
Because the proposed pension plan does not provide meaningfully better benefits, it is unclear whether adopting HB55 would achieve the stated goal of its proponents to improve the ability of state agencies to recruit employees. However, even though OPERS benefits are better under the Senate amended proposed changes, it is not clear that version will help meet the stated goal of improving recruitment either.
Most academic literature suggests that few individuals join public service because of the retirement benefits, and other factors like salary, health benefits, and working conditions are stronger factors for retention than retirement benefits (nomatter the plan design).
However, theoretically the underlying concerns about the current retirement plan could be addressed by:
(a) creating a new pension plan with adequate benefit design provisions that is an option for future OPERS members to choose, while still offering the current defined contribution plan. This could give state agencies an additional tool with which to recruit, even if it does not meaningfully help improve their ability to attract talent; and/or
(b) improve the current defined contribution plan by increasing employer contributions and offering lifetime income options to provide a better path to retirement income adequacy. This would be valuable to do even if it does not help with recruiting.
One of the reasons why OPERS was able to close their funding shortfall was a legislative commitment to paying in more than actuarially recommended each year. These overpayments will help make costs in the future lower. While this was a positive approach, unfortunately another method that Oklahoma used to reduce the OPERS funding shortfall was eliminating retirees cost-of-living adjustment. This has been helpful for the funded status of OPERS, but reduced benefits for members of the pension plan.
There are definitely better ways to approach improving benefits: Theoretically, a new pension plan could be created with benefits that are more likely to provide members with adequate retirement income. Current members could also be given the option to keep their defined contribution account, and/or all future members of OPERS could be given a choice between a pension plan and the current defined contribution plan. Or the current plan being offered could be enhanced by offering members a lifetime income option, such as converting accumulated account balances into an annuity upon retirement.
HOUSE BILL 2486 ANALYSIS BY CLASS OF MEMBERS:
What House Bill 55 Would Mean for 25-Year-Old New Hires & 40-Year-Old New Hires, by worker type
The tables below show the proposed plan’s total Benefit Scores, based on how old a member is when they are hired. We also show how proposed changes compare to the current plan for the same kind of public worker. And we show what the material effect would be on an average employee’s annual retirement earnings, using salary assumptions used by PERS trustees. Underneath each table is a figure that shows a comparative forecast for the value of benefits over time
Regular Employees, 25-Year-Old Entrant
Benefit Value Analysis for Regular Employees, 25-Year-Old Entrant
Regular Employees, 40-Year-Old Entrant
Hazardous Employees, 25-Year-Old Entrant
Benefit Value Analysis for Hazardous Employees, 25-Year-Old Entrant
Hazardous Employees, 40-Year-Old Entrant
Benefit Value Analysis for Hazardous Employees, 40-Year-Old Entrant
Elected Official, 25-Year-Old Entrant
Benefit Value Analysis for Elected Officials, 25-Year-Old Entrant
Elected Official, 40-Year-Old Entrant
Benefit Value Analysis for Elected Officials, 40-Year-Old Entrant
FOOTNOTES FROM THE RETIREMENT POLICY SCORECARD
Infographic: The Protections for Oklahoma’s Public Pensions
Oklahoma teachers’, public safety officers’, and public workers’ pension benefits are entitled to certain protections under state law and affirmed by court rulings. At the same time, the state does have some legal precedent that allows them to change particular aspects of retirement benefits.
In other words, there are parts of public pension benefits that can be changed by future state laws, but only certain parts of those benefits.
Equable Institute partnered with Columbia Law School’s Center for Public Research and Leadership to create infographics that map states’ pension governance. Understanding the legal environment for pension policies can be confusing for both lawmakers and public workers, but illuminating legally permissible policy pathways to improve funding sustainability and ensure adequate retirement income security for states’ workforces is essential.
In the case of Oklahoma, state law allows the legislature to increase employee contributions. In 2016, they did just that. The Oklahoma Legislature raised the employee contribution rate from 3% on the first $25,000 of salary and 3.5% on the remainder to a flat rate of 3.5% on all compensation.
Changes to workers’ benefit calculations are also statutorily allowed for active employees who have not met retirement requirements according to Oklahoma law.
The legal environment is favorable for these shifts – meaning that state law and legal precedent allows for changes to these aspects of pension policy.
Oklahoma can likely shift workers’ vesting periods for active employees who have not met retirement requirements, bit this has not been attempted in the state and has no legal precedent.
It is important to note that current retirees’ benefits have greater legal protection than those of active employees. Apart from reduced or eliminated COLAs, current retirees’ benefits cannot be taken away or reduced.
Disclaimer: The information here doesn’t constitute legal advice or representation. Equable is not necessarily recommending any of the policies discussed in the infographic. Some may not work for certain states, others may not be desirable policy. Ultimately, any pension policy change should honor promises made to public workers and put them on a path to retirement security, while ensuring sustainable funding measures.
Infographic: State Funded Ratio Histories
Download this infographic here.
These graphics originally appeared in the December Update to State of Pensions 2020. Read the report at Equable.org/stateofpensions.
Individual state graphics are available for download here.
Which States Have Laws that Allow for Police Pension Forfeiture?
If a police officer commits a crime in the course of performing their duties, they may be at risk of losing their pension. But only in certain states.
Most states have some kind of “pension forfeiture” laws on the books. These laws usually are related to public employees that are either convicted of, or plead no contest to, a felony or unlawful killing. Only 23 of the state laws cover law enforcement employees, such as police officers. There are three states that might cover police, depending on how they’re interpreted, and 24 states without laws covering police.
The details about what kind of crimes will lead to pension being stripped from a police officer vary from state to state. Usually the forfeiture law is limited to on-duty offenses, other times it is not. A few states allow for pension benefit reductions rather than taking the whole pension away. And the process for determining whether a pension is to be forfeited isn’t always the same: some states automatically strip pensions from individuals under these circumstances, other states have judges order the pension taken away or require pension boards to hold proceeding to consider taking the right to a pension away.
For complete details, please review the relevant statutes in your state.
If you are interested in learning more about the benefits offered to public safety officers in your state, check out the Retirement Security Report.
Disclaimer: This article and infographic is not intended as legal advice or formal legal analysis.
 There are seven states with pension forfeiture laws that do not apply to police officers, including: Delaware and Minnesota (laws only applies to surviving beneficiaries who commit an unlawful killing, not active members); Indiana and South Carolina (laws allows for pension benefits to be used as restitution for theft or embezzlement of public property, but does not otherwise require forfeiture for committing a crime); New Mexico and North Carolina (laws allow for pension forfeiture of elected official benefits only); New York (a 2018 law only allows pension forfeiture for elected officials, judges, and gubernatorial appointees)
 There are three states with laws that could be interpreted as covering police officers in addition to the 24 listed on the map above. Texas has a pension forfeiture law that only applies to the state Employees’ Retirement System, which does include some state police officers, but does not cover the vast majority of police around the state. Arkansas and Montana have laws that strip the pension of a public employee if they commit an unlawful killing, but only if the person they kill is another public employee.