In this paper, the authors present an analysis of the Arkansas Teacher Retirement System (ATRS) pension plan and an empirical investigation of the behavioral response to that plan, as well as to a possible reform plan. They begin by describing the plan parameters and discussing the incentives these parameters create. They then estimate the effect of pension wealth accrual on teacher separation decisions using a new longitudinal dataset of Arkansas teachers. The resulting coefficients are subsequently used to compare predicted separation probabilities under the current parameter regime versus a constant accrual retirement plan. The authors find evidence that teachers’ retirement decisions are sensitive to pension plan parameters. They also show that changing the pension plan design could yield a very different pattern of retirement behavior.

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