Michigan GOP Reaches Deal on Teacher Pensions

Teachers union says “back-room deal” would increase financial risk for new hires without improving funding.


Michigan Gov. Rick Snyder and state Republican legislators have agreed to changes to proposed pension reform legislation that is intended to funnel new hires into 401(k) style plans.

Although details of the changes to the Michigan Public School Employee Retirement System (MPERS) are still being worked out, the plan is to steer new hires away from the more expensive defined contribution plan. The new hires will be given the option to select a revised hybrid pension with a defined contribution component, but if they don’t choose that option within 75 days, they will be automatically be enrolled in a 401(k)-style retirement savings plan.

 “We still need to continue to work out some things, (but) I think it provides a better retirement for school employees,” Snyder told reporters.

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Michigan teachers have had the option to choose a 401(k)-style plan since 2012, but the new arrangement would match state employee and legislator pensions, allowing for up to 7% percent of a teacher’s salary if the teacher also contributes 3% of his or her salary.

The Michigan Education Association (MEA) and the American Federation of Teachers (AFT) Michigan objected to the behind-doors negotiations, as well as the proposed changes to the pension bills.

“This seems to be little more than a shell game that goes about closing the hybrid pension plan in another way,” said the MEA and AFT Michigan in a joint statement, adding that it “is certain to cost Michigan taxpayers billions in transition costs.”

The two groups have called on their members to call and write to their state representatives to prevent the proposed changes from making it into bills HB 4647 and SB 401, which reform the MPERS.

“This is not a done deal,” said MEA and AFT Michigan. “Legislative leadership might have an agreement, but individual legislators have had very little time to look over these proposals. Those bills attack the retirement of school workers, which hurts our schools, our students, and educators.”

The MEA said the new legislation would increase financial risk for new hires “without doing anything to improve the funding and stability of the current retirement system,” adding that the plan is “designed to fail,” and would cost students, schools, and taxpayers billions of dollars in the future.

However, as the details of the plan have not yet been made public, the teachers groups  also said “until we get to see and analyze bill language, it’s impossible to know for sure how much this plan will cost and whether it’s good public policy or not.

“The bottom line, however, won’t change,” said MEA and AFT Michigan. “This attempt to alter retirement plans provided to new employees will undermine the ability of future school employees to retire with dignity.”


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