By Zack Harold
July 15, 2013
If you’ve ever been curious about how state pension plans work…well, do I have a story for you. You can also click here to see my database of all state pensioners receiving more than $80,000 per year.
But today’s story, as reader Leska Foster of South Charleston pointed out, left out one state pension plan that works quite differently from the others: the Teacher’s Defined Contribution Plan. [EXPAND Read more]
This plan was opened in 1991, but in the 2000s. Unlike the regular teacher’s pension program, where enrollees eventually receive a defined monthly payout, the defined contribution plan allowed both employers and employees to pay into a privatized account.
It functioned similar to a 401K, and allowed teachers to decide how much they wanted to put into their retirement (hence, “defined contribution”). Enrollees could contribute as much or as little to their retirement as they wished, so long as their contributions didn’t dip lower than 4.5 percent of their paychecks. The level of their investments would determine how much money they would draw after retirement, however.
The plan proved unpopular. School employees overwhelmingly voted in 2005 to return to the defined benefit plan, and in 2008 the Legislature decided to allow employees to shift plans if they so desired. About 15,000 enrollees jumped ship.
There are now 4,300 employees left in the defined contribution plan, compared to the almost 36,000 in the defined benefit plan. [/EXPAND]