Michigan public school employees will have a new hybrid pension plan next year.
Gov. Rick Snyder signed Senate Bill 401 Thursday, which will close the current Michigan Public School Employees Retirement System (MSPRS) “hybrid” plan to new enrollees as of Feb. 1, 2018.
Now known as Public Act 92 of 2017, the document states the current plan—- a combination of a 401(k) and pension— will be replaced by a new 401(k)-style defined contribution plan with an automatic employer contribution of 4% and an additional 3% voluntary matching contribution from the State School Aid Fund.
The overhaul of the retirement system looks to increase the state’s share to defined contribution plans while reducing the overall system’s unfunded liabilities.
“Modernizing the school employee retirement system means these benefits will be there for retired school employees in the long term, while at the same time protecting taxpayers from escalating liabilities,” Snyder said in a statement. “We worked hard to make sure everyone was at the table in discussions about how to best revise the system and I’m thankful for all of the input and collaboration that led to a great outcome for current and future retirees as well as all Michigan taxpayers.”
Currently enrolled employees will obtain the new benefits on October 1, but will also have a 75-day window to opt out of the new plan.
The new law will also create a new optional revised hybrid plan, which includes a 50/50 share cost between the employee and employer, and require regular studies to calculate the mortality age in the system. If the mortality rate shows an increase of one or more years, it will increase the average retirement age by at least one year.
In addition, if the plan is less than 85% funded for two consecutive years, a trigger will be put in place to close it.