Public school districts with defined benefit plans attract and retain high-quality teachers, saving districts $273 million in turnover costs, according to a National Institute on Retirement Security report.
In 2003, according to NIRS, defined benefit plans led to the retention of an additional 22,000 teachers nationwide. That reduced attrition saves school districts money that otherwise would have to be spent on recruiting and training new hires.
“It’s not that much money, but it can be meaningful, especially for small school districts,” report author Ilana Boivie, NIRS director of programs, said in an interview. “Now more than ever, it’s important to look at these things because every line item matters” in school budgets.
“We wanted to look at teacher effectiveness and what role the defined benefit plans play in it. Defined benefit plans help retain highly productive teachers longer,” Ms. Boivie said.
She noted that several states have done feasibilities studies about switching to defined contribution plans, but discover that “lo and behold, there’s really no cost savings there. That unfunded liability has to be paid. Even if you have to make that tough choice of reducing benefits, defined benefit plans are just more cost-effective than defined contribution plans.”
NIRS looked at 2003 turnover rates data provided by the Alliance for Excellent Education, to gauge how such those plans impact recruitment, retention and retirement.