New public school employee retirement plan to take effect next year

Jul 14, 2017

Governor Rick Snyder has signed into law controversial changes to the state’s public school employee retirement system.

Starting in February of 2018, new teachers will get a new choice about their retirement savings. They’ll automatically be put into a straight 401(k) plan. But they can enroll in a hybrid plan if they want. That hybrid plan also includes a pension, but it’s more expensive for the teacher.

Senator Phil Pavlov (R-St. Clair) says 401(k) plans are the way of the future.

“It’s what about 95 percent of the rest of America had,” he said. “The teaching profession was the last one to come along on it.”

A part of the reason for this, advocates say, is that the new generation of workers wants portability in their retirement plans.

“It’s not necessarily moving from school to school anymore,” said Representative Thomas Albert (R-Lowell). “It’s moving from one type of math profession to another. So there’s just a lot more mobility, and we need to have a retirement plan that matches what the current market has.”

Albert sponsored a state House version of the bills.

But critics – like Democrats and teacher advocates – aren’t sold. Doug Pratt is with the Michigan Education Association. He says the teachers union is happy there’s still a choice and an improvement to the current 401(k), but there are too many unknowns with the new plan.

“When it comes down to it we have a broken system of funding education and that turns around and turns into a broken system of compensating educators,” Pratt said.

Pratt said the plan won’t pay down the unfunded liabilities – a driving motivator behind the legislation.

But Pavlov says the plan puts money toward state debt and doesn’t let the state get further in the hole.