LANSING, Mich. — The Senate has approved a reform to the Michigan Public School Employees Retirement System (MPSERS) to address a nearly $30 billion unfunded liability and ensure Michigan’s teachers have a quality retirement, said Sen. Jim Stamas.
“I am committed to providing a good education to our children and a secure retirement for our hard-working teachers,” said Stamas, R-Midland. “This reform will enable us to fulfill our obligations to those teachers who dedicated their lives to the critical task of educating the next generation of Michigan leaders.
“Importantly, this will keep the promises made to retirees and current employees. They will see no change to their pensions.”
Senate Bill 401, as passed by the Senate, would close the current hybrid plan and enroll school employees hired after Feb. 1, 2018 into a new defined contribution retirement plan. All employees would have the chance to opt into a new hybrid plan within a 75-day window.
“New school employees would receive a modern 401(k) retirement plan, like state employees and legislators,” Stamas said. “It will give our teachers a competitive retirement plan that is flexible and meets their long-term goals.”
The 401(k) plan would include a required 4 percent employer contribution plus an optional 3 percent employee contribution that would be matched by the state — for a total of 10 percent of the employee’s salary.
According to the nonpartisan Senate Fiscal Agency, between 2000 and 2016, the unfunded liability in the MPSERS pension system grew from $246 million to $29.1 billion.
“Clearly, the more than 11,000 percent increase in pension debt is unsustainable and unaffordable,” Stamas said. “We must act to solve this growing problem, which is already affecting our schools. We continue to put more resources into our schools, and we are also contributing another $1 billion to help control MPSERS costs. Even with our efforts, the increasing MPSERS debt threatens resources meant for the classroom to educate our children.
“This reform is a sustainable and affordable solution that will provide a reliable retirement to our teachers and protect vital school funding.”