Today, The Republican-controlled Senate Appropriations Committee voted 9-8 to close the school retirement system to new members. In laymen’s terms, if this bill passes, any new teachers would not have state funded pensions but would rather have retirement programs similar to 401K programs. This is a great start to reforming a system that has been broken for many years.
Currently, there are two pension programs for teachers, including the “old-school,” full pension plans that most people think of when they think of pension plans, and the newer hybrid pension plans that became available in 2012. The hybrid version gave teachers the option to choose a 401K program or a pension, and so far around 18,000 teachers have chosen 401k plans.
Jarrett Skorup, a writer for the Mackinac Center for Public Policy’s Michigan Capitol Confidential, wrote that 401K plans are appealing for many teachers because they are investing in a system that promotes workplace flexibility and funding which is stable and will pay out.
The old school pension plans, MPSERS, have unfunded liabilities of $26.7 billion (!). You read that right—$26.7 billion that MPSERS has yet to pay out. It is an antiquated system on the brink of disaster, and the biggest losers will be Michigan taxpayers and teachers who put their retirement faith in a system that couldn’t scale to meet its obligations. Now is the time for change need to make sure this never happens again.
Closing an unsustainable pension system to new teachers only makes sense. If we do not have to worry about pension shortfalls in the future, we can turn our focus on how to fix the unfunded crisis.
Opponents of the bill are claiming that the new program will cost billions of dollars to implement. And while we agree that there will likely be cost substantial cost involved in the change, the cost of running the new plan once it is implemented will be negligible. According to our math, the $2 billion investment in a market-driven, economically sustainable pension program for Michigan teachers is far less than the current $26.7 billion in unfunded liabilities and broken promises owed by the current system. Michigan taxpayers and teachers can’t afford for us to continue getting this wrong.
Contact your Senator TODAY and tell them to vote YES on closing the current school pension program in favor of an economically viable model for Michigan’s future.