An Independent Voice That Advocates For The Classroom Educator Without The Corrupting Politics Tied To Our Union And DOE Leadership.
Tuesday, March 05, 2019
Why Defined Pensions Are Great For Teachers.
One of the great benefits in being a teacher in New York State is the defined pension benefit we have. For the 40% of state teachers that are vested for a pension, the pension benefit averages about $41,703 annually, that is 54% of the teachers final three year salary, not including Social Security and other retirement plans like a 403b program. In other words, most New York State teachers can expect to enjoy a well funded retirement.
The defined benefit pension plan is mostly funded by the State's School Districts. For most Tier IV employees, the vast majority of recent retirees, the employee only pays a 3% contribution for the first ten years and nothing thereafter. That means the School Districts pay the lion's share to fund the pension.
The table below shows how much the School Districts are required to pay to adequately fund the teacher pension system.
The estimated School District contribution is expected to be 8.86% for the 2019-2020 fiscal year.
The NYC teacher pension plan is separate from the New York State Teachers pension plan but have similar employer contribution percentages. For the 2018-19 fiscal year its 11.11%.
As the existing Tier IV teachers retire and are replaced by Tier VI teachers, who are less likely to be vested or reach full retirement age, the next decade should see lower School District pension percentages needed to cover the cost as these Tier Vi teachers will be paying from 3.5% to 6% in employee contributions to their pensions.
I suspect by the next decade, new teachers will be under a defined contribution plan, where the School Districts will no longer need to worry about legacy costs as teachers will be required to self fund their pension going forward.