SB 1040 finally passes House, Senate; employees, retirees stuck with the cost

There's little good news in the Senate and House finally voting out SB 1040. On a 21-6 Senate vote and a 57-48 House vote, they increased current employee contributions to their pensions, increased retirees' share of their health insurance, and ended retiree health insurance for new hires.

"This bill is not fair. It just shifts costs around and solves nothing," said Rep. Jeff Irwin (D-Ann Arbor) who spoke in opposition to the bill.

Under SB 1040, new hires will not be moved to a defined contribution retirement benefit. They will stay in the current hybrid system which combines a defined benefit and defined contribution mix. New to the bill, is the call for a study of the financial impact moving new hires to the defined contribution would cause. The study will be done by Nov. 15.

Current employees will be paying either 4 percent or 7 percent to their retirement pension, depending on what plan they are in. Current employees will also continue to make the 3 percent contribution to their retiree health insurance, but now the money will be used to prefund the retirement system. Employees could end their 3 percent contribution if they move to a 401(k) plan which will include an employer match up to 2 percent.

Retirees will see their share of their health insurance premiums jump from the current 10 percent to 20 percent if they are 64 or younger on Jan. 1, 2013. Retirees 65 or older on that date will remain at the 10 percent share.

Employees first hired on or after Sept. 4, 2012 won't be receiving retiree health insurance. Instead they'll be placed in a 401(k) plan that includes an employer match of up to 2 percent. When new hires end their employment, they'll get a lump sum deposit.

The Senate also voted to keep the current calculation for a school district's MPSERS contribution based on payroll. The House had proposed basing the calculation on current operating expenditures.

Republican Senators Jones, Nofs, Pavlov, and Proos voted with Democrats in opposing the bill.

Update on SB 1040 (H3)