MSPERS Defined Contribution Proposal Clears Senate

Today the Senate passed a major education reform to the Michigan Public School Employees Retirement System (M.P.S.E.R.S). On party lines, the Republican Majority in the Senate narrowly passed the reform by a two vote margin, 20-18. The new proposal offered within Senate Bill 1040 mandates all new public school employees hired on or after July 1, 2013 be placed into a defined contribution 401(K) program. Senator Mark Jansen, a key proponent of the legislation said, “If we had done something like this in the middle 90’s, we probably would have a zero liability. In the future, legislators will look back on this group as the Legislature that fixed an un-ended nightmare.”

Other key components of the Senate bill 1040 are as follows:

· Employees hired prior to 1990 that are currently in the basic pension plan would be required to start making a 5% salary contribution to the plan.

· Public School Employees enrolled in the Member Investment Plan and currently contributing 3.9 percent of their salary would be required to increase that donation to 8 percent. A variety of exemptions are available if the new employee chooses the 401(k) type system for future service.

· School Retirees would have to pay 20 percent of their Health Insurance Premium, an increase of 10 percent.

· New School Employees will not be eligible for retiree health insurance and would instead be mandated to set up a 401(k) style account that the State would match 2 percent of their salary that could be used toward future retirement healthcare costs.

All Democratic amendments to provide prefunding of the retirement, and retirement healthcare systems, were rejected by the Republicans.

posted by PAA Online , Friday, May 18, 2012 11:54 AM
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