Teaching Profession

Michigan GOP Prioritizes Teacher Pension Reform

By Emmanuel Felton — November 23, 2016 3 min read
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Michigan’s largest teachers’ union is gearing up for a blockbuster fight over the future of the state’s teacher retirement system. The next speaker of the Michigan House of Representatives, Republican Tom Leonard, announced shortly after his election to that position that one of his top priorities is overhauling the state’s “broken” teacher retirement system. While Republican Governor Rick Snyder has expressed concern that moving teachers over to 401(k) plans could be too costly for the state upfront, Republicans in the state legislature are preparing to push through a bill that would require all new teachers to enroll in 401(k) plans instead of more traditional state-backed pension plans. But the state teachers’ union argues that the current system, which requires new teachers to enroll in hybrid pension/401(k) plans, is already helping solve the problem.

“This provides a solution to a problem that does not exist,” Michigan Education Association spokesman David Crim told MLive.com, an online consortium of eight Michigan newspapers. “This seems like another political attack on school employees that we will fight vigorously.”

Since 2010, new teachers in Michigan have been enrolled into hybrid plans. Under traditional pension plans, the state guarantees teachers a specific amount of monthly retirement income. Under 401(k) plans, while states still contribute to teachers’ retirement funds, teachers make their own investment decisions and aren’t guaranteed any funds for retirement.

While state Republicans will maintain a healthy legislative majority and control over the governor’s office, it appears that lawmakers plan to push through pension reforms during the current lame duck session, which runs through next month. Republican lawmakers say the move is necessary to slash the $26.7 billion in unfunded liabilities facing the Michigan Public School Employee Retirement System. But union leaders point to a 2012 independent study that found that moving all new teachers to 401(k) plans would only make the problem worse, since without new teachers in the system there would be fewer members contributing to cover the existing pension bill. The researchers estimated the move would cost the state an additional $4.5 billion over the first ten years.

The state board of education, which is controlled by Democrats, struck a similar note.

“A 2012 study determined that the transition costs to place public school employees into the same defined contribution plan as other state employees would cost an additional $13.6 billion over 30 years, plus an additional $4.5 billion in short-term costs,” the board declared in a statement. “In addition, according to the Office of Retirement Services, transitioning new employees will not address the existing defined benefit legacy liability, but will most likely enhance it. Therefore, the State Board of Education urges caution in making these changes, and supports maintaining the current hybrid plan, which is fully funded.”

Union spokesman Crim also argues that the move would make the profession less attractive, but Republican state Representative Tim Kelly disputes that point.

“Most people don’t have pensions anymore. I think pensions are a relic of the past,” he told MLive.com. “A pension or lack thereof shouldn’t be why someone becomes a teacher.”

Moving states away from traditional pension plans, which tend to be far more expensive than 401(k) plans, has long been a cause for conservatives around the country. Back in September, Doug DeVos—scion of the DeVos family, who are major donors to Republicans in Michigan and around the country—said that he considered restructuring pensions as the number one priority for Michigan lawmakers. His sister-in-law Betsy DeVos has been nominated by president-elect Donald Trump to be the next education secretary.

A version of this news article first appeared in the Teacher Beat blog.

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