Teacher Pension Enhancements and Staffing in an Urban School District

Many states enhanced benefits in teacher retirement plans during the 1990s. This paper examines the school staffing effects of one such enhancement in a major urban school district with mostly high poverty schools. Pension rule changes in 1999 for St. Louis public school teachers resulted in very large increases in pension wealth for active teachers, as well as a powerful increase in “push” incentives for earlier retirement. Simple descriptive statistics on retirement patterns before and after the enhancements suggest much earlier retirement resulted. Shorter teaching spells imply a steady state with more teaching vacancies and a larger share of novice teachers in classrooms. To better understand the long run effects of these changes and alternatives policies, the authors estimate a structural model of teacher retirement. Simulations of retirement behavior for a representative senior teacher point to shorter completed teaching spells and earlier retirement age as a result of the enhancements. By contrast, moving from the post-1999 to a DC- type plan would extend the teaching career of a representative senior teacher by roughly three years. Simulations of voluntary DC conversation plans suggest that many senior teachers would enroll, thereby reducing workforce turnover, and overall pension costs.