Governor, Legislative Leadership Reach Deal-In-Concept on MPSERS

Bob Kefgen's picture

Earlier this afternoon, Governor Snyder and legislative leadership announced that they had reached a conceptual agreement on a plan to reform the state's MPSERS system. The House and Senate Education Committees have both posted meetings for first thing tomorrow morning to discuss this legislation, but it is unclear whether either body plans to vote.

The proposed deal would leave schools and school employees shouldering a larger burden for a smaller, less attractive retirement benefit. As this debate moves forward, MASSP will be watching closely to make sure that any changes do not result in increased costs for districts or a retirement benefit that is so poor that it will make it even more difficult to recruit new educators.

Below is a summary of the main elements of the proposal:

  • If it passed, the portions of the proposal that apply only to new employees would take effect for those employees hired on or after February 1, 2018. Other portions of the proposal would have other effective dates as outlined below.
  • WITH TWO EXCEPTIONS, the changes would only apply to new employees hired after the reforms took effect.
    1. The first exception is that the proposed reforms would eliminate the option for all MPSERS employees (current and future) to make service credit purchases (i.e. buy years) effective after September 29, 2017 at 5 p.m. This would not have any impact on service credit already purchased or service credit that employees have initiated the process to purchase.
    2. The second exception applies only to employees who have opted out of the Pension Plus (hybrid) MPSERS system and are currently receiving a 401k-style defined contribution retirement. Those employees would qualify for the new, more generous 401k plan provided in the bill (see below for details) beginning October 1, 2017.
  • New employees would continue to have a choice between a hybrid pension or a 401k-style retirement plan.
  • The hybrid system would be changed for new employees (hired after Feb 1, 2018):
    1. Employees would have to pay 50% of the cost of the hybrid plan including both the base cost of the pension plan and any future unfunded liability accrued by the hybrid system. This burden would not be capped or limited in any way. The cost of those contributions would come out of a new employees paycheck.
    2. The state would be empowered to gradually change the retirement age mid-stream based on mortality projections.
    3. The hybrid system would be automatically closed to new employees if it ever dipped below being 85% funded for 2 consecutive years, which could leave educators stranded in a broken pension system and saddled with ever increasing costs.
  • The 401k-style defined contribution option would:
    1. Be changed to mirror the more generous plan offered to state employees (4% base contribution, 3% match). NOTE: This change would apply to both new employees who took this option and current employees who opted for a defined contribution retirement.
    2. Become the default option for new employees who do not actively elect to join the hybrid system.

Finally, the 2017-18 budget proposal released last week sets aside nearly $500 million to pay for MPSERS reform. Under this proposal, only a small portion of that funding would be required, but this plan make no provision for returning those dollars to schools, which leaves the door open for the state to siphon that money off.

Full details of both bills, including detailed analyses from the House and Senate Fiscal Agencies are available on the legislature website: HB 4647 and SB 401. For a less detailed breakdown, a one-page summary of the plan was circulated by its proponents before bill detaisl were available.  MASSP members can view a copy of that document here.

MASSP will continue to keep members informed as this situation evolves.

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MPSERS_Reform_Summary.pdf537.9 KB