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Default Settings: How Ohio can nudge teachers toward a secure retirement

Chad Aldeman
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Ohio is one of only seven states to give teachers and other education employees a choice over their retirement plan. Early in their employment, they are handed a form that allows them to opt for a traditional pension plan, a 401(k)-style defined-contribution (DC) plan, or a plan that combines elements of each.

If they make no affirmative decision at all — that is, if they don’t return the form with a choice clearly indicated within their first 180 days on the job — they are automatically enrolled in the first option, the defined-benefit (DB) plan. As might be expected, many new Ohio teachers, about three-quarters of them in recent years, take no action and thus end up in the DB plan.

Ohio deserves credit for giving its teachers a choice over their retirement plan, but the stakes for making the right decision are high. If they enroll in the DB plan, or default into it, educators cannot reverse their decision. And because the Buckeye State is one of fifteen states that do not cover teachers under Social Security, the plan that workers choose will provide their only retirement benefits while working in Ohio public schools.

In “Default Settings: How Ohio can nudge teachers toward a secure retirement,” author Chad Aldeman explains the three choices available to teachers and models out how workers would earn retirement benefits under each plan. He finds that that Ohio educators would be better off under one of the alternatives than under the DB plan. If state policymakers intend to provide the greatest retirement benefits to the most workers, they should be open to changing the default option.

Download the full report here or read it in the viewer below.

On November 12, 2020, author Chad Aldeman presented his findings via a Zoom event. Video of that presentation is below: