TEACHER RETIREMENT COMPARISONS

OLR Research Report


May 10, 2002		2002-R-0424 (Revised)
TEACHER RETIREMENT COMPARISONS
By: Judith Lohman, Chief Analyst

For Connecticut, Maine, Massachusetts, New Jersey, New York, and Rhode Island, you asked for charts (1) showing their retirement benefit formulas and average teacher salaries and (2) using each state's average teacher salary as a base, comparing their retirement benefits and percentages of replacement income for a teacher with 25, 27, 30, 32, and 35 years of service.

PENSION FORMULAS AND AVERAGE TEACHER SALARIES

Table 1 below shows average 2000-01 teacher salaries in the six states and each state's normal and early teacher retirement formula.

Table 1: Teacher Salaries and Pension Formulas in Six States

*State*	*Average Salary 2000-01¹*	*Normal Retirement Multiplier(s)* *(x Final Average Salary (FAS) x Service)²*	*Early Retirement Reduction Rate²*
Connecticut*	$ 52,693	2%	Less than 30 years' service = multiplier reduced by . 12 per year based on number of years away from normal retirement. 30 or more years' service = multiplier reduced by . 06 for each year away from normal retirement.
Maine*	36,373	2%	None
Massachusetts*	47,789	. 5% - 2. 5% (depending on age)	None
New Jersey	53,281	Years of service/55 x FAS	3% for each year from age 47 to age 55
New York	52,040	1. 67% (under 20 years); 2% (first 30 years) + 1. 5% (additional years over 30)	3% for each year before age 62
Rhode Island	48,474	Years 1-10: 1. 7% 11-20: 1. 9% 21-34: 3% 35: 2%	None

*Teachers not covered by Social Security

¹Source: National Education Association

²Source: State retirement system web pages

PENSION AMOUNTS AND INCOME REPLACEMENT PERCENTAGES

Tables 2 and 3 below show benefits and income replacement percentages available in each of the six states with the requested service levels at ages 57 and 60, using the average salary for each state as the final average salary.

Age 57 Retirement

Income replacement levels for teachers retiring in the six states at age 57 vary. Maine's overall replacement percentages are the best of the six, since its plan allows a teacher to retire with an unreduced pension after 25 years regardless of age. None of the other states has as low a threshold for normal retirement. Rhode Island has the most restrictive retirement thresholds, requiring a person to be at least age 60 or to have a minimum of 28 years service before retiring, even with a reduced pension.

Connecticut's replacement percentages appear comparable to those in the other states at all service levels.

Table 2: Teachers Retiring at Age 57

(Early retirements shown in bold)


*Years of* *Service*	Connecticut*		Maine*		Massachusetts*		*New Jersey*		*New York (Tier 4 - hired after 8/31/83)*		*Rhode Island*
*Years of* *Service*	*Benefit*	%	*Benefit*	%	*Benefit*	%	*Benefit*	%	*Benefit*	%	*Benefit*	%
25	$ 21,604	41	$ 18,187	50	$ 20,310	43	$ 24,219	45	20,550	39	Not eligible
27	23,185	44	19,641	54	21,935	46	26,156	49	22,200	43	Not eligible
30	28,981	55	21,824	60	24,372	51	29,062	55	31,220	60	29,084	60
32	30,562	58	23,279	64	25,997	54	31,000	58	32,780	63	33,447	69
35	36,885	70	25,461	70	28,434	60	33,906	64	35,070	67	37,325	77

*Teachers not covered by Social Security

Age 60 Retirement

Income replacement percentages for teachers retiring at age 60 are lower at all service levels in New York and New Jersey than in the other states. This lower replacement percentage stems from the two states' relatively high average active duty salaries and lower pension multipliers. Rhode Island's pension formula rewards longevity by granting a higher share of salary at higher service levels. This feature has the effect of increasing that state's income replacement percentages for teachers with more than 30 years' service.

Connecticut's replacement percentages are equal to or better than those of the other states at all service levels.

Table 3: Teachers Retiring at Age 60

(Early retirements shown in bold)


*Years of* *Service*	Connecticut*		Maine*		Massachusetts*		*New Jersey*		*New York (Tier 4 - hired after 8/31/83)*		*Rhode Island*
*Years of* *Service*	*Benefit*	%	*Benefit*	%	*Benefit*	%	*Benefit*	%	*Benefit*	%	*Benefit*	%
25	$ 26,347	50	$ 18,187	50	$ 23,895	50	$ 24,219	45	$ 23,150	44	$ 23,268	48
27	28,454	54	19,641	54	25,806	54	26,156	49	25,010	46	26,176	54
30	31,616	60	21,824	60	28,673	60	29,062	55	31,220	60	29,084	60
32	33,724	64	23,279	64	30,585	64	31,000	58	32,780	63	33,447	69
35	36,885	70	25,461	70	33,452	70	33,906	64	35,070	67	37,325	77

*Teachers not covered by Social Security

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