Could Different Retirement Benefits Result in More Effective Teachers?

We evaluate the chance that changing retirement benefits will lead to greater teacher effectiveness. Changing from defined benefit pensions to defined contribution or cash balance plans would raise initial compensation and effectiveness, while it would increase turnover and thus lower effectiveness. We simulate the effects of higher initial compensation and greater turnover on teacher effectiveness from changing retirement plans and calculate the potential transition costs. There is a 60—70 percent chance that effectiveness would fall if retirement benefits are changed. Transition costs could amount to 0.8 percent of payroll in the third decade after changing retirement benefits.