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.


Jump to the Complete Rankings

The Top 10 / Bottom 10 States by Average Quality of Retirement Benefits for New Teachers

  1. South Carolina (94.2%)
  2. Tennessee (88.2%)
  3. South Dakota (78.7%)
  4. Oregon (78.6%)
  5. Michigan (75.3%)
  6. Washington (74.4%)
  7. Rhode Island (73.9%)
  8. Florida (73.7%)
  9. Hawaii (71.0%)
  10. Virginia (70.7%)

  1. Illinois (49.7%)
  2. Mississippi (49.6%)
  3. Alabama (49.1%)
  4. New Jersey (48.0%)
  5. Nevada (47.1%)
  6. Georgia (46.2%)
  7. Wisconsin (46.1%)
  8. Kentucky (46.1%)
  9. Texas (44.9%)
  10. 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.

Best U.S. States for New Teacher Retirement Benefits front page.


Read the Report for Full Details on How We Measured Each Teacher Retirement Plan


State Ranking



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%
2 2 Tennessee Hybrid 88.20% 77.90% 86.70% 100.00%
3 3 South Dakota Hybrid 78.70% 62.30% 75.50% 98.30%
4 4 Oregon Hybrid 78.60% 59.30% 76.60% 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%
11 7 Rhode Island Hybrid 73.90% 60.00% 63.30% 98.30%
13 8 Florida DC Plan (Pension Option Available) 73.70% 66.50% 63.00% 91.80%
14 9 Hawaii Hybrid 71.00% 41.70% 71.50% 100.00%
15 10 Virginia Hybrid 70.70% 51.50% 62.30% 98.30%
(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.

Read and Download the Summary Report 


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.


Read and Download Special Report #1


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.


Read and Download Special Report #2


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.



Read and Download Special Report #3



In the coming days and weeks, we will be highlighting key findings and more data from the Retirement Security Report Teacher Edition. Visit 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.


Infographic: The Protections for Texas’ Public Pensions

Texas 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 Texas, state law allows the legislature to shift workers’ vesting periods. In 2009, they did just that, lengthening vesting periods from five to 10 years. Changes have also been made to employee contribution rates in 2013 and 2015, benefit calculations, and retirement age.

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. 

Download the infographic here

Texas Shouldn’t Punish Companies that Divest from Fossil Fuels

A Texas state Senator has introduced a bill that would require the state’s pension funds to pull any investments from a company that divests or “boycotts” the gas and oil industry.

Under the bill, any entity that divests from oil and gas companies will be put on a list prepared and maintained by the state comptroller’s office, and will be warned by the state’s various pension funds that they have 90 days to change their position before the funds “shall sell, redeem, divest, or withdraw all publicly traded securities of the company.”

Texas Lt. Gov. Dan Patrick has called the bill one of his top legislative priorities, according to the Austin American-Statesman. “Any Wall Street firm that says, ‘We are turning our back on the oil and gas industry in Texas and we will not loan them money (and) we will not invest’ — Texas is not going to give them any of our money to hold or invest,” Patrick reportedly said at a public policy forum sponsored by the Texas Business Leadership Council.

Unlike Texas, many state and local pension funds have sought to distance themselves from oil and gas companies in recent years in favor of alternative energy. Some have made the decision to do so in an effort to reduce their carbon footprint and mitigate the effects of climate change, while others have pointed to gas and oil companies’ poor return for investors.

The Lone Star State has a close relationship with the fossil fuel industry. The U.S. Energy Information Administration, a subsidiary of the U.S. Department of Energy, states Texas accounted for 41% of the country’s crude oil production in 2019.

This proposal, ironically, would commit the same kind of fiduciary mistake that it purports to avoid. Pension funds shouldn’t play politics of any kind with the money they have been entrusted to manage. Divesting or investing for political reasons goes against the fiduciary responsibility to manage public employee funds well.

All of which can means divesting from fossil fuel stocks purely for political, social, or environmental reasons would be a violation of fiduciary duty. On the flip side, divesting from fossil fuel stocks as part of an investment strategy is as acceptable as investing in those stocks would be as part of a different strategy.

This leads to the irony in the proposed legislation. Forcing the state pension funds to divest from companies that are in turn divesting from the fossil fuel industry would be a politically-driven investment decision. The state legislature is not setting the investment strategy for Texas Employees Retirement System or Texas Teachers Retirement System or any other state pension fund.

And given the state’s 76.1% funded ratio, it’s vital state leaders focus more on increasing that number, and not making a political statement.

If the reason for pension funds to avoid divesting from the fossil fuel industry is because pension funds shouldn’t play politics, then it follows that they should avoid divesting from any other kind of company for political reasons, too.

Texas Comptroller Calls on State Lawmakers to Address Pension Challenges

Texas Comptroller Glenn Hegar recently called on state lawmakers to address long-term needs throughout the Lone Star State, including addressing the challenges associated with its pension systems. The most pressing needs might be for the pension system for Texas state employees, as we wrote about last year.

“If we don’t address these challenges, the price we pay might be ailing pensions affecting both our state credit rating and the financial security of our teachers and state employees,” Hegar wrote in an op-ed for The Dallas Morning News.

In his op-ed, Hegar points out that Texas’ pension system for teachers already has one of the largest shortfalls in the country—the state’s Teacher Retirement System has an unfunded liability of $50.6 billion.

Teachers are scheduled to see their contribution rates increase this year, based on a law passed in 2019. Without action from lawmakers, state workers will likely see more money come out of their paychecks to help decrease their own system’s unfunded liabilities because Texas is at the constitutional cap on state contributions (10%) to that pension plan.

Hager is right to call attention to this matter. According to an Equable Institute analysis, the Texas Employees’ Retirement System only had 48 cents on the dollar for promised retiree benefits before Covid-19 struck, and that number is expected to go down due to the pandemic. In 2020, Texas saw a a -2.35 % return on investments—according to Equable’s 2020 State of Pensions December update—the worst of any state, despite assuming a 7.32 % return.

The 87th Texas legislative session began on Jan. 12 and runs through May 31.


This article republishes selections from “Texas comptroller: Legislators face a tough budget this year. They still must invest in the long term,” an op-ed by Glenn Hegar for The Dallas Morning News on Jan. 10, 2021. 

Infographic: State Funded Ratio Histories

Funded Ratio History for U.S. Statewide Pension Funds

Download this infographic here.

These graphics originally appeared in the December Update to State of Pensions 2020. Read the report at

Individual state graphics are available for download here

Are Texas Teacher Retirement Benefits Adequate?

Download the report | Are Texas Teacher Retirement Benefits Adequate?

Long-serving veterans who remain in the Teacher Retirement System of Texas for 27 or more years can earn enough retirement income to meet living expenses. But all other TRS members are likely to leave with inadequate savings. Even for those who have secured a pension, their benefits have not been consistently adjusted for inflation, leaving retirees with a steadily eroding benefit.

Those are the key findings of our new paper on teacher retirement benefits in Texas, a state that has chosen not to provide most of its educators with Social Security coverage. The lack of Social Security coverage across its school districts makes it even more important for the state to provide all of its public-sector employees with adequate retirement benefits.

To address this problem, we recommend that Texas legislators open up a different type of defined benefit retirement plan for teachers and other education employees called a Guaranteed Return (GR) plan. GR plans are a kind of defined-benefit plan, similar to a pension, but a GR plan defines the benefit an employee receives as a guaranteed investment return on employee and employer contributions. There are a number of ways GR plans can be designed, but we model a plan where TRS employees receive a guaranteed 4% return every year, plus additional upside when investments grow faster.

You can download and read the full report here. But to put the plans in context, consider the teacher profiles below. For each teacher, we describe their role within Texas public schools and consider how much they might have earned under a cost-neutral GR plan like the one described in the paper. Additionally, each profile features a quote from the teachers on their perspectives on retirement.


Josue Tamarez is a 4th grade teacher. In his 10th year of teaching, Mr. Tamarez is already eligible to collect a pension when he retires. But he would need to work another 17 years for the pension to be worth enough to retire on, and even then it would be at risk of being eroded by inflation over time. If Mr. Tamarez had participated in a GR Plan like the one modeled here, he could have had a retirement account balance worth nearly $160,000 by now.

Mr. Tamarez on retirement: “Retirement benefits didn’t affect me staying in the classroom. Many young teachers like me, we are not thinking 30 years ahead. We’re thinking, “Can I pay my mortgage today?’”


Miriam Rodgers teaches US Government, Economics, and Theory of Knowledge to 11th and 12th graders. By the end of this year, her fifth year teaching in Texas, Ms. Rodgers will qualify for a pension. But she would need to remain teaching in Texas until at least the year 2032 in order for her TRS benefit to provide minimally comfortable retirement benefits.

If Ms. Rodgers had participated in a GR Plan like the one modeled here, her retirement benefits would adequately match her years of service no matter how long she teaches.

Ms. Rodgers on retirement: “I think an attractive pension or at least the myth of it is necessary to keep people from running for the hills. But I don’t think it’s bringing people into teaching. I’ve never met a teacher who’s like, “I’m just going to work all this time for these sweet, sweet benefits.” …When I hear politicians talking about lazy teachers just soaking up their sweet salary and benefits, it’s totally ludicrous.”


Celeste Graham teaches 10th grade world history. In her 5th year of teaching Ms. Graham will qualify for a pension at the end of the year. But she would need to keep working for two more decades to qualify for a pension worth enough to retire on, and even then the money paid out to her may be eroded by inflation over time.

If Ms. Graham had participated in a GR Plan like the one modeled here, she would have benefits proportional to her years of service by the end of this year.

Ms. Graham on retirement: “I suspect that my life is going to expand beyond the borders of the state and the systems that it has. And I want to be in a position where I have transferable benefits from a system that’s honored no matter where my life takes me.”


Mark Rogers teaches 2nd grade. After 10 years of teaching, Mr. Rogers is already eligible to collect a pension when he retires. But he would need to work another 15 or 20 years in TRS for the pension to be worth enough to retire on, and even then it would be at risk of being eroded by inflation over time.

If Mr. Rogers had participated in a GR Plan like the one modeled here, he could have qualified for an annuity worth approximately twice what his TRS benefits are currently worth.

Mr. Rogers on retirement: “Will the pension keep me in the classroom past 25 years of service? Maybe. I think people value their time. And if I find something in 25 years that is really interesting for me, that is outside of the classroom, my pension is not going to make the decision for me…. If I still love what I’m doing, I’ll stay. But it’s not my retirement benefit that’s going to make that choice.”


As illustrated by the examples above, GR plans offer distinct advantages over traditional defined-benefit (DB) pension plans like the one currently operated by TRS.

First, under GR plans, workers earn benefits more steadily throughout their careers, rather than waiting to reach the age and service eligibility requirements of traditional defined benefit pension plans. This feature would ensure more Texas education employees earn adequate retirement benefits compared to the status quo.

Under the plan described above, we assume retirement contributions stay the same as they are under current law. Teachers, districts, and the state would not see their contributions change. Workers would have the same amount of money going toward their retirement, and the state would continue making the same payments toward the plan’s unfunded liabilities.

When employees were ready to retire, they would have a choice between a guaranteed stream of payments through an annuity paid out in guaranteed monthly payments or a lump sum value of their account. If the state set the lifetime annuity as the default option — which we recommend — the GR plan would function just like the monthly benefit checks delivered through the current TRS structure. The state could offer employees the ability to select an annuity that’s right for them, including whether they want to build in protection for their survivors or whether they want their annuity payments to include cost-of-living adjustments (which TRS currently lacks).

Second, a GR plan would reduce the risk that the state will accrue additional unfunded liabilities going forward. As of this year, TRS has accumulated an unfunded liability of $50.6 billion, which eats into state and school district budgets, keeps teacher compensation low, and prevents retirees from receiving cost-of-living adjustments on their pensions. With the national economy in the midst of a recession in the wake of the COVID-19 pandemic, TRS’ unfunded liabilities are likely to rise even further in the coming years.

The shortfall at TRS is partially from the legislature’s failure to ensure it pays actuarially required contributions every year and partially because investments have not met the TRS board’s assumptions. In response, Texas legislators have opted to reduce costs by cutting benefits for new hires. TRS is currently operating three tiers of benefits based on the employee’s hire date, and each tier offers less generous retirement benefits than the tier that came before it. These cuts harm the retirement savings of new workers and limit the ability of schools to recruit and retain high-quality teachers.

The state legislature has also gradually increased the contribution rate that all active teachers have to pay into TRS, even though benefits are not increasing. In 2019, the Texas legislature passed legislation that will phase in a series of increases to employee and employer contribution rates toward TRS. Those changes will help the plan’s finances, but they also mean that districts will have less discretionary money and workers will see reductions in their take-home pay. By 2024, members will have 8.25% of their pay taken out for TRS contributions.

While these changes will improve the long-term financial viability of the TRS plan, they do not alter the larger structural problems. Moreover, the changes have done nothing to prevent the plans from accruing additional unfunded liabilities going forward. TRS is still banking on lofty investment returns, and if its assumptions prove incorrect, as they have in the past, the state’s unfunded liabilities could continue to grow.

Adding a GR plan will not reduce TRS’ current unfunded liability. The state is responsible for paying off its debts regardless of how future teachers earn benefits. However, over time, covering new workers in a GR plan would reduce the potential for adding new debt.

Fortunately, Texas already has a model within its state borders: Texas county and municipal employees are already covered by GR plans and have been for decades. Read our full report for how Texas can adopt a similar model for education employees. All Texas teachers deserve adequate retirement benefits. The current TRS system isn’t meeting that goal, but a well-designed GR plan could.

To learn more about the quality of Texas’s public retirement benefits, check out the interactive Retirement Security Report.

This article republishes “Are Texas Teacher Retirement Benefits Adequate?” by Chad Aldeman, Anthony Randazzo, an article published at in December 2020.

Texas Teachers’ Retirement System at a Glance

The Texas Teachers’ Retirement System provides benefits to more than 1.6 million members, according to its website. Here’s what you need to know about the system and the plan it offers.

The Texas Teachers’ Retirement System members are enrolled in a Guaranteed Income plan. The vesting period for teachers is five years.

Unlike most states, Texas teachers are not allowed to join Social Security — the Lone Star State is one of 12 that have opted out of the program due to Constitutional concerns.

It takes 21 years before a teacher’s pension is worth more than what they’ve paid into the plan. Yet close to half of educators never receive any pension benefit, either because they change careers or move across state lines. As of June 2020, only 29% of teachers work long enough for their pension to be worth more than what they’ve paid, and only 12% ever receive a full pension, based on teacher retention assumptions provided by the retirement system.

The majority of new Texas teachers leave before substantial pension benefits kick-in, will earn less than $1,000 a month in retirement income, and receive no Social Security.

The Texas Teachers’ Retirement System has a $53.6 billion pension funding shortfall, also called pension debt. Unless major funding improvements are enacted by the state’s legislature, it will take 29 years before Texas TRS closes its pension debt.

If this trend continues, though, pension debt will continue to grow quickly — increasing by nearly $150 billion — because legislatively authorized contributions are often less than what actuaries have recommended.

Download the report: Texas Teachers’ Retirement System at a Glance

Understanding the State of Teacher Pension Funding in 2020

Teachers and educators make up the largest group of public employees in the country. Roughly half of the pension promises made by states and cities have been made to public school employees. But roughly half of the pension debt in America is held by teacher pension plans too. Here is a snapshot of the state of teacher pension funding in 2020.

Teacher pensions funding fact sheet, page 1 of 2

Teacher pension funding fact sheet page 2 of 2

Click Here to download this fact sheet. To learn more about pension funding for all professions, check out Equable’s full  State of Pensions 2020 report.

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.[1] Only 23 of the state laws cover law enforcement employees, such as police officers.[2] 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. 



[1] 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)

[2] 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.

Groundhog Day: The States That Keep Repeating Their Pension Mistakes

Figuring out how to manage a public pension system is hard, complicated work. Pension board trustees have to juggle complex investment strategy, and make critical judgment calls — like assuming how long people will live on average. So, states and their pension boards could at least try to make things easier and learn from past mistakes. 

Sadly, this isn’t always the case. In fact, there are at least a dozen states right now that don’t want to change their ways when it comes to assumptions about future investment returns. Year after year, these states fail to take bold enough steps to lower their assumed rate of return making the same pension investment mistakes over and over – kind of like Groundhog Day.

Consider Kansas: trustees for their Public Employees’ Retirement System (PERS) have been assuming for at least the last two decades that investment returns will make 7.75% to 8%. That’s turned out to be overly optimistic, and even though there have been some years with double-digit investment returns, the average over the long-term has fallen short of that goal. As a result, Kansas has developed nearly $9 billion pension debt, and KPERS has less than 70% of the money it should have on hand to pay current and future pension benefits.

Meanwhile, around the country the national average assumed rate of return has fallen below 7.25%. The best funded pension plans, like the 100% funded South Dakota Retirement System, often have assumed rates of return closer to 6.5%. 

It is critical to have an accurate assumed rate of return because it is the basis for determining contribution rates into a pension fund. The higher trustees assume their future investment earning will be, the less they will need to ask be contributed into the pension fund today. The lower a pension fund’s assumed rate of return, the more that needs to be put in today in order to pay out pension checks in the future. 

So when actuary advisors for Kansas PERS recommended earlier this year that trustees lower the pension plan’s assumed rate of return, it was a surprise when they said no. The trustees wanted to stay the course. Even though Kansas PERS’ own investment consultants say there is only a 50% or so chance of earning that 7.75% return over the next 20 to 30-years.

It’s like they are stuck in a cycle year after year, choosing to keep their high risk investment assumptions. And they aren’t the only ones. 

For most states there is at best a 50/50 chance of earning a 7.5% return over the next few decades. And yet, there are 36 public pensions making exactly that prediction. Most of them are struggling with their finances and dealing with billions in pension debt. But even these states aren’t the highest risk takers.

There are 13 state and local retirement systems that have promised benefits over $1 billion, that are also assuming investment returns higher than 7.5%. Here is a list of them, along with their funded ratio (which ideally should be 100%):

8% Assumed Rate of Return

  • Ohio Police and Fire Pension Fund — 69% funded
  • Arkansas State Highway Employees’ Retirement System — 84% funded 

7.75% Assumed Rate of Return

  • Kansas City Public School Retirement System — 61% funded
  • Mississippi Public Employees Retirement System — 61% funded
  • Alabama Employees Retirement System — 63% funded
  • North Dakota Teachers Fund for Retirement — 66% funded
  • Kansas Public Employees Retirement System — 68% funded
  • Alabama Teachers Retirement System — 70% funded
  • Michigan Municipal Employees’ Retirement System — 73% funded (technically the cities, counties, and other local employers that participate in MERS can select their own assumed return between 7.5% and 7.75%)

7.55% to 7.7% Assumed Rate of Return

  • Louisiana State Employees Retirement System (7.65%) — 64% funded
  • Louisiana Teachers Retirement System (7.55%) — 67% funded
  • Montana Public Employees Retirement Board (7.65%) — 74% funded
  • Austin, Texas Fire Fighters Relief and Retirement Fund (7.7%) — 88% funded

(All of the numbers above are as of each pension plan’s most recent actual reports, typically as of June 2019, though a few plans haven’t publicly updated their status since December 2018.)

Why do states keep making these risky assumptions about their investments year after year? Times have changed. Markets have changed. The world since the financial crisis of 2008 is very different. Interest rates are at historic lows — which is great if you want to buy a house, but bad if you want to get a large investment from a safe bond. 

The states above need to take a good long look at their shadow this year and consider whether or not to keep with their same predictions year after year.