The Michigan Legislature is considering taking up MPSERS reforms in the upcoming lame duck session. The goal of these reforms is to close the MPSERS defined benefit pension system in favor of a defined contribution 401(k) plan for new public school employees. Although the closure of the defined benefit plan will not directly impact current retirees’ pensions, it will impact the health of the retirement system overall. MARSP is asking all public school retirees to call and write both their Senators and Representatives to discuss the following information:
- Lame duck is the wrong time to address this seriously complex issue.
- 2012 reforms are working and should be allowed to continue to work, as the Governor and Lt. Governor have stated.
- The unnecessary closing of MPSERS will cost the State an enormous amount of money.
A more detailed description of each of these points is below. To find your legislators use the Contact Your Legislator feature on the MARSP website.
MPSERS reform critical issues to discuss with your legislators
Any further reforms should be carefully measured and planned, with an eye toward long-term stability, not rushed through during lame duck.
- Undertaking reforms of this magnitude during a lame duck session would be irresponsible and runs the risk of creating problems down the road if not done properly.
- Such reforms will have wide-ranging effects on many Michigan workers, and must be done with proper public debate and input.
- Lt. Gov. Brian Calley has said that it’s unrealistic to rush through further reforms during lame duck because of their sizeable scope compared to the short time allowed by lame duck.
There is no problem to fix. The MPSERS reforms that were put in place in 2012 eliminated $12 billion in debt and stabilized the system for the future.
- These reforms, sought by Gov. Snyder, strengthened the financial health of the system by paying down debt and reducing future obligations.
- The Pension Plus plan (Hybrid Plan) created in 2012 for school employees is 100% funded and carries less risk than the MPSERS Legacy plans.
- The hybrid plan is financially manageable with a cost to employers of just over 4 percent of payroll.
- Replacing the hybrid plan with a defined contribution plan – whether it’s modeled after the state employee plan or the plan proposed in Senate Bill 102 or House Bill 5218 – will cost more, and begs the question of where the money will come from to pay for it.
- Gov. Snyder has defended the hybrid system calling it, “A good program,” signaling he has no “intention to…talk about changing it at this point,” while acknowledging the major upfront costs associated with a change.
Closing MPSERS is unnecessary and will cost the state over $2.5 billion over the next five years.
- Closing MPSERS comes with a high price tag and does not eliminate one dime of existing liability. There will be zero savings over the next 30 years.
- Costs associated with closing the system are estimated to be $550 million in 2017 alone, and an additional $2 billion over the next five years.
- Closing the system would result in a 67% increase in the money paid by school districts to fund retirement. This will result in higher costs for schools in the short term, and will impact kids in the classroom immediately.
- Failing to address these costs would hearken back to the days of accounting gimmicks that led to Michigan’s structural deficit. We cannot afford to move backwards.