A Bull in the Classroom

Public-school teachers take the stock market by the horns and retire early

Beverly Summerbell thought she was telling the truth this past winter: "In my Christmas letter to friends and relatives," she recalls, "I said I would be teaching for two more years and then would retire. But then in February, we got the letter. I was in total shock. I thought, there has to be a catch."

Summerbell works as a special-education teacher at Andover Elementary in the Anoka-Hennepin School District, where she has taught for the last 28 years. She's only 55 years old--the earliest age at which she can retire with full benefits--but thanks to a booming stock market and a little-known provision in some 1973 legislation that revamped the public-school employee retirement program, she'll be calling it quits this spring.

Down in Bloomington, at Normandale Hills Elementary, principal Tom Lee is faced with replacing six of his fourteen classroom teachers, all for the same reason: Like Summerbell, they figure they can't afford not to retire early. As one of Lee's departing faculty members puts it, "After the letters arrived, we joked around in the hallways about whether we'd won the TRA lottery."

(left to right) Doris Stenberg, Myrna Schwichenberg, Karolyn Lee, and Carol Arvidson are among a slew of teachers at Normandale Hills Elementary who'll be retiring early
Kristine Heykants
(left to right) Doris Stenberg, Myrna Schwichenberg, Karolyn Lee, and Carol Arvidson are among a slew of teachers at Normandale Hills Elementary who'll be retiring early

TRA stands for the Teachers Retirement Association, which manages retirement plans for public-school instructors across the state and in metro suburbs. (Minneapolis, St. Paul, and Duluth each have their own plans, so no teachers in those cities are affected.) The letter was sent by TRA in February to 3,400 individuals--in all, five percent of their nonretired members. The missive referred to a form its recipients had received back in 1968; anyone who had not filled out that form had stayed in the then-current plan, called the Improved Money Purchase (IMP) program, which was tied to stock-market earnings. The rest were switched to a variety of replacement packages. Then, in 1973, the Minnesota Legislature revamped those pension plans: They crafted something called the High 5 Formula Program, which bases retirement pay on the highest five years of a teacher's salary, and all but the IMP teachers switched over. Lawmakers also inserted a clause in the legislation that required benefits to be reviewed annually for the 3,400 teachers who'd opted to remain with IMP; those teachers would be eligible to receive benefits under whichever plan proved more profitable, the IMP or the High 5.

As it turns out, most of those who received the TRA letter had been mistakenly calculating their retirement earnings based on High 5, which over the years had always been higher than those figured under IMP, and so were planning to retire on schedule, around age 65. Until this year, that is--when the bullish stock market started setting records day after day, causing IMP payouts to spike wildly--according to TRA staff, an average of $800 to $900 per month over High 5's benefits. Much to their surprise, IMP teachers had hit the jackpot.

And so, suddenly, principal Lee is faced with more than half of his staff retiring early, in order to reap the profits of a program they barely remember choosing three decades ago. "Do you know anyone who wants a teaching job?" he asks with a laugh, and follows quickly with a serious note of worry about how he's going to fill those vacancies. Lee says that not all who received the TRA letter were happy about it, mainly because it presented them a dilemma: keep on with their careers, or leave teaching immediately. "Some of my teachers were elated--they wanted to retire. Others have really struggled with it."

Karolyn Lee (no relation), who teaches in the media department at Normandale Hills Elementary, is among them. She has taught for 28 years in the Bloomington School District; when the letter showed up in her mailbox, she wasn't ready to leave the field just yet. After all, she's only 55. If she were to wait until the average retirement age for teachers--59.3, for TRA members--the stock market might go back down and her benefits would default back to High 5. That scenario, she says, would amount to a huge loss--perhaps, she says, $10,000 every year for the rest of her life. After some intense soul-searching, Lee came to the conclusion that she couldn't take that chance. She's retiring at the end of this school year.

Harley Ogata, an attorney for Education Minnesota, the state's teachers union, predicts that nearly everyone who got the letter will sooner or later follow suit. "TRA doesn't really know the full impact--it directly affects 3,400 teachers, and they're predicting that 500 will retire this year," he says. "Certainly, almost all will go out in the next two years. People aren't going to wait too long, because it's dependent on what happens with the stock market, and so to continue waiting is a risk."

Trouble is, these retirements come at a time when schools are already pinched for teachers, especially substitutes. Principal Lee says many of those who take advantage of the IMP windfall have plans to come back next year, to teach in the system's before- and after-school programs and to work as substitutes. Jim Martin, executive director of human resources for the Bloomington public schools, reports that his district, like most others affected, is busy courting the early retirees who, like last year, will be allowed to earn up to $9,120 a year without altering their benefits. So far, many have expressed an eagerness to return, including Beverly Summerbell, who reasons that "subbing would give us the opportunity to keep in contact with kids and teachers from time to time. No lesson plans or report cards--just going in to enjoy the children."

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