But what about teachers? Do vesting periods shape teacher behavior?
If so, we should see it in pension plan withdrawal rates. Pension plans use their historical data to make future projections, and those projections feed into the plan’s estimates for how much money they will need to pay future benefits.
Say a state has a 5-year vesting period. If teachers truly valued their pension benefit, there should be some contingent of 4-year veterans who stick it out one more year just to reach that fifth year. But when I looked at this question with Kelly Robson Foster, we could not find a single state that operationalizes this in their withdrawal assumptions.
I’ll show you a couple. First up is California. They have a five-year vesting requirement. And yet here are their withdrawal rate assumptions. As you can see, they assume a bigger drop-off from four to five years than they do from years five to six. This is exactly opposite of what you’d expect if California teachers were somehow sticking around to qualify for a CalSTRS pension. Instead, it looks more like a fairly steady decrease, and the pension incentive is doing nothing at all.
