Are Pension Refunds the Same as a 401k? – Eduwonk

Over half of new teachers won’t meet the minimum vesting or service requirements to receive a pension. One common response is that these teachers are allowed to receive a refund on their contributions plus interest, and that the refund is comparable to private sector workers who receive a 401k. It’s a good point, but it’s not exactly the case for all teachers.

While it’s true a teacher can get a refund on her pension contributions plus interest in some states, like California, in other states, like Illinois, teachers do not receive interest. In fact, in Illinois, teachers receive less than their original employee contributions. An Illinois teacher is required to contribute 9.4 percent of her paycheck to the state teachers’ retirement system. Upon leaving the classroom, however, she is only entitled to a refund equal to 8.4 percent of her earnings. And, in the majority of states, teachers do not receive any portion of their employer’s contributions.

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