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Who Benefits from Pension Enhancements?

During the late 1990s public pension funds across the United States accrued large actuarial surpluses. The seemingly flush conditions of the pension funds led legislators in most states to substantially improve retirement benefits for public workers, including teachers. In this study we examine the benefit enhancements to the teacher pension system in Missouri. These enhancements resulted in large windfall gains for teachers who were close to retirement when the legislation was enacted. By contrast, novice teachers, and teachers who had not yet entered the labor force, were made worse off. The reason is that front-end contribution rates have been raised for current teachers to offset past liabilities accrued from the enhancements. Other things equal, the teaching profession in Missouri is now less appealing for young teachers as a result of the pension enhancements.

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Paper provided by Department of Economics, University of Missouri in its series Working Papers with number 1207.

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Length: 33 pgs.
Date of creation: 23 May 2012
Date of revision: 08 Jun 2012
Handle: RePEc:umc:wpaper:1207
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