Protection Products for Teachers

Protection Products for Teachers



Protection Products for Teachers

Introduction

Teacher Insurance, or the Teachers Insurance and Annuity Fund, was ranked as the nation's 33rd largest company by Fortune in 2001. The company's CREF Stock Account, with $92 billion in assets, is the largest single-managed equity fund in the world. From Insurance original endowment provided by the Carnegie Corporation for the benefit of private college professors, total Teacher Insurance assets have grown to over $250 billion, and the nonprofit company has begun offering financial products to the general public as well as to its core education and research community.

The concept of institutionalized pension funds and retirement security only became an issue in industrialized society. In the pre-industrial world older individuals were provided for either by their children or through the local church. Limited pension plans did exist in the United States before the 20th century, but they did not become common until the 1910s. For some in the United States, the concept of pensions threatened the American ideal of personal liberty and accentuated fears of a paternalistic government. In 1861, however, the government did provide pensions to those who served in the Civil War. A few private corporations had annuity plans beginning in 1875. By 1932, however, only 15 percent of U.S. workers were covered by a retirement plan. Corporate pension systems were not always established out of concern for the workers but rather as a means to reduce employee turnover and to promote loyalty, or to control employees. (Davis 1988 69-71)

Discussion

In 1890 Andrew Carnegie, as a newly appointed university trustee, became concerned over the lack of compensation received by college teachers. He saw that their small salaries did not permit them to accumulate savings for retirement. Only a few universities and colleges had initiated retirement plans or funds, but they generally assisted only those professors who remained employed with the institution for longer than 15 years. These systems varied, with plans such as that of Columbia University, which allowed retirement at one-half salary after both 15 years of service and after attaining the age of 65. Carnegie became convinced of the need to provide pensions for college teachers through discussions with Henry Smith Pritchett, president of Massachusetts Institute of Technology. Pritchett and Carnegie recognized that retirement pensions could strengthen higher education by improving the financial security of college teachers. The result was the founding in 1905 of the Carnegie Foundation, reincorporated under a federal charter as the Carnegie Foundation for the Advancement of Teaching in 1906.

Originally endowed with $10 million from bonds issued on Carnegie's United States Steel Corporation, the Carnegie Foundation became the major provider of pensions to college teachers in private, nonsectarian institutions meeting certain academic and financial requirements. In 1908, Carnegie increased the endowment by $5 million to extend the Carnegie pensions to teachers in state universities, bringing the total gift to $15 million.

The original 52 member institutions included the major private universities in the United States and Canada in ...