Topic:
RETIREMENT AND PENSION SYSTEMS; TEACHERS;
Location:
TEACHERS - RETIREMENT;

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

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

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

JL:ts