Missouri
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CALDER Authors Related Publications
While it is generally understood that defined benefit pension systems concentrate benefits on career teachers and impose costs on mobile teachers, there has been very little analysis of the magnitude of these effects. The authors develop a measure of implicit redistribution of pension wealth among teachers at varying ages of separation. Compared to a neutral system, often about half of an entering cohort's net pension wealth is redistributed to teachers who separate in their fifties from those who separate earlier. There is some variation across six state systems. This implies large costs for interstate mobility. Estimates show teachers who split a thirty-year career between two pension plans often lose over half their net pension wealth compared to teachers who complete a career in a single system. Plan options that permit purchases of service years mitigate few or none of these losses. It is difficult to explain these patterns of costs and benefits on efficiency grounds. More likely explanations include the relative influence of senior versus junior educators in interest group politics and a coordination problem between states. Published: December 2009 | Download:
Defined Benefit pension plans often generate odd time patterns of benefits. One typical pattern exhibits low accrual in early years, accelerating in mid-late years, followed by dramatic decline, or even negative returns in years that are relatively young for retirement. We consider four states for specific analysis: Arkansas, Missouri, California and Massachusetts. There are interesting variations among these states' formulas, which affect the incentive to retire early. We identify key factors in the defined benefit formulas that drive such patterns and likely consequences for employee behavior. We examine the efficiency and equity consequences of these systems and lessons that might be drawn for pension reform. Published: April 2007 | Download:
This paper examines late career mobility and retirement decisions for a cohort of mid-career Missouri public school teachers. The rate of accrual of traditional defined benefit pension systems is highly nonlinear and back-loaded with most of the gain occurring in the final years prior to retirement. Also, these pension systems have rules that introduce kinks or discontinuities in the rate of accrual after 30 years. This paper explores the effect of these pension rules on retirement patterns. Missouri permits teachers to continue teaching part-time while collecting benefits. Teachers can also retire from one pension system and begin teaching in another. The paper examines both types of behavior. Published: April 2007 | Download:
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