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Legislation Introduced Reforming Retirement System

May 26, 2017

This week, Representative Thomas Albert (R-Belding) and Senator Phil Pavlov (R-Saint Clair) introduced legislation reforming the Michigan Public School Employee Retirement System (MPSERS).  “In 2010 the legislature passed the current hybrid system in an attempt to get the ever-growing unfunded liability to the state under control.  However, there are current members who don’t believe those reforms were enough to fix the issue and further reform needs to occur,” stated Matt Sowash of MLC.

The proposal would place all public-school employees hired after September 30, 2017 into a defined contribution retirement plan modeled after the plan that is offered to state employees hired since 1997.  Additionally, a public-school employee would have their employer contribute 4% of the employee’s wages into a 401k plan.  The employee could then contribute another 3%, which would be matched by the employer.  The employer match would be covered by the state.  According to an analysis by the non-partisan House Fiscal Agency, the House bill is estimated to increase costs in the 2018-2019 Fiscal Year by $410 million.  Over the forty-year amortization period it is estimated to cost up to $46.4 billion.  The House bill was referred to the House Education Reform Committee, which is chaired by Representative Tim Kelly (R-Saginaw Twp.). Senator Pavlov’s bill was referred to the Senate Education Committee, of which he serves as chair.

Currently, House and Senate leadership have both expressed support for reforming MPSERS.  However, Governor Rick Snyder has stated he would prefer to keep the current hybrid system.  As this issue continues, it could have an impact on the budget process for the upcoming 2017-2018 Fiscal Year should the governor and legislative leadership continue to be opposed on the reforms.  Additionally, several members of the House and Senate Democratic caucuses have stated they are adamantly opposed to the proposal.

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