DB Plan Better for Teachers

California teachers do better with a defined benefit plan than a 401(k), research shows. 

Not only are California’s educators better off with the CalSTRS [California State Teachers’ Retirement System] Defined Benefit Program, but schools greatly benefit from the reduced work force turnover, according to a recent U.C. Berkeley study, “Are California Teachers Better Off With a Pension or a 401(k)?”

Created in 1913, the CalSTRS pension benefit structure was designed as a retention tool to reward full-career educators, as well as to provide retirement security to program participants. This design stands the test of time and complements the career trajectories of California’s educators. The U.C. Berkeley study shows that the existing CalSTRS pension structure—designed to benefit teachers who stay until at least early retirement age—is better matched to meet the retirement needs of the state’s teaching work force than either a 401(k)-style or cash balance plan.

The study’s key findings are that three-quarters of classroom teaching in California is done by long-term teachers, and 75% of active educators will have worked at least 20 years. The average age at retirement is 61, with approximately 29 years of service. Nearly half of educators (49%) will retire with 30 or more years of service. About one-quarter (26%) will have been covered by CalSTRS for 20 to 29 years.

The report can be downloaded online