Cash on the Table? A Behavioral Analysis of Refund Claimants and Annuitants in the Illinois Teachers' Retirement System.
详细信息
文摘
This dissertation documents pension benefit choices made by public school teachers enrolled in the Illinois Teachers Retirement System TRS),where they choose between taking a lump-sum withdrawal of their refundable contributions and deferring a pension benefit. The analysis explores the extent to which vested teachers enrolled in TRS separate from service with positive pension wealth,estimates how much money is "left on the table" at a conventional discount rate,and investigates what types of teachers display higher or lower discount rates as indicated by cashout patterns. To control for the relative attractiveness between choices,the analysis relies on three central measures: the pension-wealth-to-cash-out-ratio,net pension wealth,and the internal rate of return. Thirty-six percent of classroom teachers in TRS choose to withdraw their refundable contributions,and this estimate arguably provides a lower bound for similar "final salary" defined benefit pension plans in other states. Results from behavioral models find higher cashout rates among male,African American,and Hispanic teachers； teachers who work in rural districts； and teachers who did not receive a degree from an elite institution in Illinois. These results indicate higher discount rates among these groups. I find no evidence in the data of a relationship between subject endorsements and cashout decisions. Behavioral findings are consistent across models that assume different discount rates. The analysis concludes with an estimate of the aggregate leakage that occurs among TRS members who take a refund claim. Leakage is defined as NetPW for refund claimants who quit when the value of their pension wealth outweighs their refundable contributions. Leakage that refund claimants experience since 1980,adjusted for taxes and penalties,amount to $34,120 per refund claimant among all members and $35,229 per refund claimant among classroom teachers. Over four-fifths of this leakage,however,occurred since 2000. Annuitants incur about $9,000 per member. Relative to the overall fiscal health of TRS,total leakage by members since 1980 as a percentage of pension debt is 0.2 percent. The findings in this analysis suggest a set of policy implications,both for retirement security and for how some teachers value their retirement benefits.