MacGregor votes to save Michigan teacher retirement plan

Reforms will save area districts nearly $9.3 million by 2014

The Michigan House recently approved legislation to save the state’s teacher retirement system, saving almost $16 billion for Michigan taxpayers and allowing more money into the classroom to benefit students, state Rep. Peter MacGregor announced.

Senate Bill 1040 reforms the Michigan Public School Employees’ Retirement System (MPSERS) Act to eliminate almost $16 billion in long-term pension and health care liability for Michigan’s public schools.

“Today’s vote to reform the MPSERS system was crucial to making sure that teachers’ pensions and health care exist in the future,” said MacGregor, R-Rockford. “Without these reforms, the unfunded liabilities that currently exist in the system would have continued to limit education funding from getting to the classroom where it belongs. The current system is unsustainable and without action would have continued piling billions of dollars of debt onto our children and grandchildren.”

MPSERS is a statewide public employee defined benefit plan. The plan has debts that currently total more than $45 billion, which schools must eventually pay.

Before 1994, schools paid a flat 5 percent of their payroll into the retirement system. Now, because of the growing debt and the need to pay retiring educators, schools are paying 27 percent, and their payments are expected to jump as high as 35 percent. The House plan will eventually take this rate back down to 5 percent.

Under the reform plan, public school employees hired on or after August 1, 2012, would have the option to receive an existing hybrid defined-benefit, defined-contribution plan or a straight defined contribution (401k) account.

Employees hired on or after August 1, 2012 would no longer receive defined retirement health care but would receive matching employer contributions up to 2 percent of compensation deposited into a 401k-type account.

“These commonsense changes were absolutely necessary to keep our schools from falling further behind while also saving the retirement system so that Michigan educators can still have high-quality retirement options in the future,” MacGregor said. “These reforms give schools the ability to put the focus back on educating Michigan children while still giving teachers options for retirement and protecting the pensions that teachers have already earned.”

Under these reforms, each of the districts within the 73rd House District will see savings, totaling nearly $9.3 million over the next two years.

SB 1040 now goes to the Senate for a concurrence vote.

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