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Which plan to choose? The determinants of pension system choice for public school teachers*

Published online by Cambridge University Press:  12 November 2014

DAN GOLDHABER  and
CYRUS GROUT
DAN GOLDHABER
Affiliation:
University of Washington, Center for Education Data and Research, 3876 Bridge Way N, Seattle, WA 98103, USA (e-mail: [email protected], [email protected]).
CYRUS GROUT
Affiliation:
University of Washington, Center for Education Data and Research, 3876 Bridge Way N, Seattle, WA 98103, USA (e-mail: [email protected], [email protected]).
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Abstract

This paper examines a natural experiment in which Washington State teachers were offered the opportunity to choose between enrolling in a traditional defined benefit (DB) plan and a hybrid plan with DB and defined contribution (DC) components. We find plan preference is weakly related to estimates of the relative financial benefits of being in either the DB or hybrid system and strongly related to teacher age. Importantly, we also find that the majority of teachers prefer the hybrid plan, and that teachers opting into the hybrid plan tend to be more effective based on student output measures of teacher productivity. These results suggest that policy shifts toward pension systems that include DC options do not necessarily make teaching a less desirable profession, particularly for the most productive employees.

Keywords

G18H75Public pensionspension choiceeducation financevalue-added
Type
Articles
Information
Journal of Pension Economics & Finance , Volume 15 , Issue 1 , January 2016 , pp. 30 - 54
Copyright
Copyright © Cambridge University Press 2014 

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Footnotes

*

We are grateful to the Washington State Department of Retirement Systems and the Office of the Superintendent of Public Instruction for providing the confidential data used in this study. We also gratefully acknowledge the financial support of the Joyce Foundation and the Center for Analysis of Longitudinal Data in Education Research (CALDER), which is funded through Award #R305C120008 by the Institute of Education Sciences, US Department of Education. We also benefitted from input on early drafts of this paper from Wes Bignell, Annie Pennucci, Cory Koedel, Josh McGee, and James Cowan, and two anonymous reviewers. Any and all errors are solely the responsibility of the study's authors, and the views expressed are those of the authors and should not be attributed to their institutions, the study's funders, or the agencies supplying data.

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