Teacher Pensions and Retirement Behavior: How Teacher Pension Rules Affect Behavior, Mobility, and Retirement. Working Paper 5

This paper examines late career mobility and retirement decisions for a cohort of mid-career Missouri public school teachers. Specifically, the paper follows a cohort of teachers whose combined age and experience totaled 45 or more years in fall 1991 through the 2005-06 school year. Like many public employee pensions, Missouri has a system that permits teachers to receive full benefits if the sum of their age and experience is at least 80 ("rule of 80"). Thus, the sum of age and experience for most of the teachers in this cohort will hit 80--full retirement eligibility--in the 16-year window studied. Traditional benefit (DB) pension systems provide teachers with a large annuity value on retirement. The accrual of this annuity value occurs over the teacher's entire work life; however, the rate of accrual is highly nonlinear and back-loaded with most of the gain occurring in the final years prior to retirement. In addition, these pension systems have various 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, as well as general descriptive data on retirement patterns. Like many states, Missouri permits teachers to continue teaching part-time while collecting benefits (e.g., DROP plans). Teachers can also retire from one pension system and begin teaching in another. The paper examines both types of behavior. The primary source of data for this study is administrative teacher records maintained by the Missouri Department of Elementary and Secondary Education. These records include data on teacher experience, demographics, teaching field, compensation, retirement, and workforce exit, as well as the employing school and district. The paper also compares teacher retirement data from the Missouri administrative records with data from the 2000-01 Teacher Follow-up Survey. (Contains 16 figures, 1 table and 12 footnotes.)