So the cycle continues, with the tussling done in the public eye and billions of dollars at stake. So long as questions about teacher pensions—including contribution rates. Investment allocations, and COLAs—are settle in the political arena, STRS will remain under intense scrutiny. It’s not just STRS, either. Any number of public pension systems have also been embroiled in controversy. And like STRS, the largesse needed to appease special interests has put many of them on shaky financial ground.
The way out is to stop propping up this
Byzantine system and move to a modern approach that USA Phone Number List gives teachers control of their own retirement. To do this, Ohio should more fully leverage its “defined contribution,” or 401(k)-style, retirement plan. As most private sector workers know—and some in the public sector, too—this model allows employees to save for retirement via contributions to a personal savings account. The funds are “portable” as employees can change jobs without penalty—an appealing feature in today’s mobile economy. From an employer perspective, these plans are easier to manage, as no pension debt accrues, no complex actuarial calculations are need, and the costs of retirement benefits are clear (i.e., the amount an employer contributes to workers’ accounts).
The good news is that
Ohio has already established a 401(k)-style defined CW Leads contribution option for teachers, managed by STRS.[1] Under this plan, teachers contribute 14.0 percent of their salary for retirement, while their employer contributes another 11.1 percent—good for a combined 25.1 percent contribution, a rate that is considered to meet the “best practice standard” by the Reason Foundation. Teachers may choose from various investment options offered by STRS, and to address concerns about outliving savings, STRS provides an option to convert funds into an annuity that provides a lifetime stream of income. To top it off, pension expert Chad Aldeman has shown that Ohio teachers in the defined contribution plan accrue substantially more retirement wealth than their counterparts in the traditional pension.
