What Teachers and NFL Players Have in Common: Pension Problems

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Finally, the longest six months of the year are over. Football is back! The season’s first week ends tonight, with back-to-back Monday Night Football contests, and 32 teams — along with their millions of fans — are all dreaming the same dream: “This could be our year.” Anything is possible.
For someone like me, a fan of the Buffalo Bills – a team that hasn’t been to the playoffs in 16 years – this is easily the best time of the season. 15–1, I can feel it: Hope springs eternal!
September is also when most teachers are headed back to school. And, both in the NFL and in classrooms, rookies abound. We rely on rookie teachers more than in the past. In the NFL, more than 200 rookies joined the league in April. The commonalities don’t stop there. Neither teachers nor NFL players can expect to stay in their profession for very long. And, surprisingly, both teachers and NFL players are among the very few careers that offer a pension for retirement.
The problem is that the pension system really isn’t very good for either.
In the NFL, players now need five years of service before they vest and become eligible for a pension. In the world of pensions, that is a reasonable vesting period. But the devil is in the details: Most players don’t stay in the league long enough to qualify. The average career lasts only 3.3 years. The NFL disputes this figure and instead claims that for players who make a team’s 53-man roster as a rookie, the average career is 6.86 years.
Based on these estimates, it’s reasonable to conclude that around half of all NFL players never earn a pension. Among those who do qualify, the average pension was worth $43,000 per year in 2014. They can begin to draw on their pension at age 55.
It’s about the same for teachers. Around half leave the profession without a pension. But in 21 states, the vesting period is longer. And in 15 states, teachers need to work at least twice as long as NFL players to be eligible for a pension. Like NFL players, most teachers do not stay long enough, so when their teaching careers end, often they walk away with no retirement savings. To make matters worse, for those educators who do stay long enough to be eligible for a pension, it will take about 22 years to break even on their contributions.
In other words, for most teachers, their individual contributions to their pension are more valuable than the pension itself until they teach for more than 20 years.
So for those of us keeping score, most teachers and NFL players are ineligible for a pension. But the NFL scores points because football players typically earn a pension that is more valuable than the average teacher pension in 46 states. And they are able to collect their retirement funds at an earlier age than most teachers.
While the pension plan for the NFL does not serve its players particularly well, teachers fall far short of the goal line when it comes to their retirement. Here are the top six ways that teacher pensions are outperformed by the NFL pension plan:
  1. Money, money, money! Football players earn, at minimum, hundreds of thousands dollars more than teachers. Although the value of an NFL player’s pension does not depend on his salary, it does for teachers. So that means teachers need to work for decades and seek out the highest salary possible in their final years to maximize their retirement benefit.
  2. Social Security woes. Social Security is for everyone, right? Wrong. It is for football players. But in several states, teachers cannot participate in Social Security. In fact, about 1.2 million teachers are not covered by Social Security. Not only does this mean less money when they retire, it can also leave teachers particularly vulnerable to poorly designed pension plans.
  3. You can take your money with you. NFL players move around a lot. Even the Sheriff, Peyton Manning, one of the biggest winners from the NFL pension system, had to move once. Moving doesn’t affect their retirement funds. It makes sense that they can take their money with them. But this is not true for teachers. Their retirement benefits, even if they are vested, are not portable. That means any teacher who moves out of state has to leave that retirement fund there and start a new one in their new state. Keeping two pension plans can amount to hundreds of thousands of dollars in losses.
  4. Choices. NFL players have the option of opening a 401(k) account with the league in addition to their pension. In fact, the plan is really generous. The league will match player contributions at a 2-to-1 rate for up to $26,000. Most teachers have access to a portable retirement plan, but they rarely receive matching contributions from their employers.
  5. The NFL is a lucrative and stable employer. The NFL is at least a $45 billion industry with more than 12,000 current and former players. It’s in great shape. Players don’t have to worry – at least not seriously – that the league will go bankrupt or suddenly decide not to fund its pension. Teachers aren’t so lucky. Many states kicked the can for decades and now have billions of dollars of unfunded pension liabilities. In Chicago, home of the Bears, the district is estimated to be about $20 billion behind. To make matters worse, teacher pension funding is handled by ever-changing state legislatures. One year they might get policy makers who meet their pension obligations. The next year, they might not. Yikes.
  6. Teachers are vilified, while football players are idolized. Even though Comedy Central’s Key and Peele did a great teacher “mock draft,” I doubt anyone has a Fat Head poster of a teacher. The simple truth is that NFL players are revered. In Boston, Tom Brady can do no wrong. It’s pretty much the opposite for teachers. They’re called glorified babysitters; New Jersey Governor Chris Christie threatened to punch them; and they’re blamed for state fiscal woes.
So let’s recap: Neither NFL players nor teachers have a pension plan that meets the majority of their needs. But for teachers, the failure of the plan to provide a good retirement benefit is particularly costly.  
To fix this, states have got to stop the bleeding. They need to, at a minimum, offer teachers a pension that provides retirement security for all, or a portable retirement account with a savings match. This wouldn’t eliminate states’ current liabilities, but it would make sure that they don’t dig the hole any deeper. And, as any good football fan knows, when you’re down, the comeback starts with defense.

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