It’s True – 401-Ks make for Worse Pensions for Teachers

If someone tells you your kid’s teacher would be better off with a 401(k) than a pension, don’t believe it

— By Nari Rhee – Op-Ed in LA Times —

Like Mrs. O-W, most public school teachers working today count on traditional pensions — which guarantee a monthly income based on age, salary and years of service — as the main source of financial security in retirement. Forty percent of teachers nationwide aren’t covered by Social Security; pension plans, in which employer and employee contributions are invested in a pooled, professionally managed fund governed by a board of trustees, provide their only source of guaranteed retirement income.

Now teachers across the country are facing aggressive political attacks on their pensions. In 2010 Michigan placed new teachers into a hybrid plan consisting of a significantly reduced pension and a mandatory 401(k)-type plan. Last week, the state’s Republican governor, Rick Snyder, under pressure from right-wing legislators to scrap the pension component, signed a bill that will direct most new teachers into just a 401(k). Pennsylvania also recently passed a hybrid pension bill that pushes new teachers into 401(k)-only plans, and similar efforts are afoot in other states.

As they move to dismantle secure pensions for teachers, GOP politicians are starting to argue that eliminating guaranteed pensions is what’s best for teachers. They base this claim on dubious research, sponsored by anti-pension groups, that uses high attrition rates among entering teachers to claim that “most teachers” don’t stay in their jobs long enough to get a decent pension.

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