States Act on Pensions in 2011, and Teachers Pay More
States churned out a lot of new laws affecting the pension plans for teachers and other public workers this year, and the bottom line is this: In several states, educators and other government employees are being asked to pay more toward their retirements.
At least 27 states made some kind of change to their pension laws affecting state public employees or teachers in 2011, according to the National Conference of State Legislatures.
States went into this year's legislative sessions at a time of mounting concern over unfunded liabilites in those plans and the year-to-year cost the plans heap on states. (Teachers' unions and some others have said those fears are overstated, and that many states have themselves to blame for the condition of their plans, because they skimped on payments in past years.)
There was a lot of buzz initially about the potential for state policymakers to try to make sweeping, structural changes to state pension plans. One such change would have been moving teachers and other public employees from defined benefit systems—the norm in the public sector—to defined contribution plans, such as 401(k) systems, in which workers' returns are more closely tied to the market.
But state policies went in a different directon. The biggest focus in 2011 was requiring public employees to chip in more to the costs of their pension plans, said Ron Snell, a senior fellow at NCSL. Sixteen states approved measures to require public employees to contribute more to their pensions, with 13 of those policies affecting teachers, Snell said. (Eleven states, by comparison, took that step in 2010.)
States have also increased the vesting period for new members, and increased age and service requirements for their programs, NCSL found. Here's a recent presentation Snell made that outlines most of the changes.
Unions in a couple states, Florida and New Jersey, are challenging new state pension laws in court, arguing that the policies violate existing contracts, among other claims. The outcome of state lawsuits over pension benefits often hinges in large part on individual state constitutions, and so it's possible that the legal fights in New Jersey, Florida, and other states where lawsuits are ongoing could produce very different results, Snell said.
"We could very well see decisions that contradict each other," he said.