Monday, November 28, 2016

POSSIBLE PENSION ATTACK COMING in the Legislature’s “Lame Duck” Session

Beginning Tuesday, November 29th, the Michigan Legislature will be in session for three weeks.  This seems like a very short period of time, but it has proven in the past to be one of the most destructive times for Michigan’s public education system.  This time period is the last three weeks of the current legislature’s “reign” before newly elected officials are sworn in for the next session in January of 2017.

There have been numerous rumors about what will happen during this 3 week period, and as of this morning the legislature’s agenda has not been published.  What is known is that the DeVoss family (of Amway fame and major Republican campaign contributors, as well as Betsy DeVoss, current appointee of Donald Trump) has announced a plan to move Michigan public employees into a 401(k) styled defined contribution plan. 
The premise is that the current pension system is “broken”, and that there are dangerous unfunded liabilities that need to be addressed.  The truth is that the economic crash of 2008 was more detrimental to pension funds than any other factor.   However, recent changes have dramatically increased employee contributions into the system.  You all know that your contributions increased in 2012!    Also, in 2012 a “hybrid” system was put into effect for all school employees hired after that date.   The hybrid system is fully funded.  

The 2012 law also eliminated healthcare benefits for anyone hired after that date.  These changes will also bring relief to the retirement system over the next several years.
So, what’s broken?   And, what’s the problem?

Here’s what the MEA has researched and found:
1)      First, no one is getting rich off public school employee pensions.  45% of public school employees receive a pension of less than $14,500 a year.

2)      Some people do not realize that retirees receive less than 45% of their Final Average Compensation as a pension payment.

3)      Hedge fund managers and other Wall Street corporations are the real winners in eliminating traditional pensions plans and moving the money to their 401(k)s.  Please ask around; how many people lost more than half of their retirement funds when these accounts were devastated by the 2008 Wall Street collapse?  In retirement, people need secure funds!

4)      Numerous studies have shown that, in addition to being much less secure than a traditional pension, any savings to the state for making such a change would not be realized for more than 30 years. 


What Have Educational Employees Done to Sustain the Michigan Public School Employees Retirement System (MPSERS)?

1)       In 1986 the MIP plan was introduced that required members to make contributions to their retirement benefits

2)      In 2012 the 1.5% multiplier was reduced to 1.25% unless a member chose to pay from 1 to 4% more into their retirement fund

a.       Basic members increased from 0 to 4%

b.      MIP Fixed increased from 3.9 to 7%

c.       MIP Graded members increased from a graded percentage of up to 4.3% to 7%

d.      MIP-Plus members increased from a graded percentage of up to 6.4% to 7%

3)      In 2012 new employees hired after PA 300’s effective date were placed in a “hybrid” system.  These employees will receive a smaller guaranteed monthly pension that will be combined with an individual retirement account. 

4)      Healthcare in retirement was ended for those hired after September 4, 2012.  Employees can choose to contribute up to 2% in a health account with an employer matching contribution.

Currently, public school employees are likely contributing almost 10% of their income to funds for a pension and to get some sort of health benefit in retirement. Add this to the cost of student loans many of our young teachers are paying, plus the cost of a place to live, transportation, and continuing costs for the education credits they must have to maintain their certifications…it is overwhelming.