Senate walks out on MPSERS vote

School districts may be faced with financial uncertainty because the Senate didn’t pass SB 1040 —an unprecedented attack on school employee retirement. When they failed to get the necessary votes, they simply walked away. Now, the supposed savings gained by shifting costs to employees and retirees won’t materialize before the June 30 budget-setting deadline for school districts.

Earlier in the day, the House passed the bill with changes on a 57-47 vote, but without a Senate vote, the bill sits.

Because of the efforts of our lobbyists and MEA leaders, members and staff, the House version was an improvement, but many current, retired and future school employees would still be left with a hefty financial burden.

In the House version of SB 1040, current basic plan employees will be contributing 4 percent of their salary to the Michigan Public Employees Retirement System (MPSERS), while those in the Member Investment Program (MIP) will contribute 7 percent. That’s in addition to the 3 percent mandated retirement contribution employees have been making. Currently, that amount is being held in escrow by the state.

School employees will still have to decide by Sept. 28—instead of Aug. 31--whether to pay those increased contributions and keep a 1.5 percent multiplier; or keep their current contribution rate and receive a 1.25 percent multiplier; or freeze their current benefits and move into a defined contribution 401k plan with a 4 percent employer contribution.

A major change to the bill affects current retirees 65 years and older who would be “grandfathered” and continue to pay 10 percent of the cost of their health insurance premium. Other retirees will be paying 20 percent of the cost.

The Senate never addressed the issue of stranded costs caused by the loss of members through privatization and by the exemption of charter schools contributing to the system. But the House version dealt with the issue by requiring school districts to contribute to MPSERS based on their expenditures, rather than on their payroll.  

The most contentious issue for the two chambers continues to be what to do with new hires. The Senate Republicans’ version moved all new employees into a defined contribution plan. The House version kept them in the current hybrid plan—a cross between a defined contribution and benefit plan. This issue—probably more than any other—robbed the Governor and Republican legislative leaders of their chance to make what they consider to be the “solution” to the retirement system’s financial problems.

Your contacts with legislators made a difference—they bought us another month to convince legislators that SB 1040 is not the solution to a problem that has been a long time in the making and school employees didn’t create. We can’t afford to let them lose sight of what their vote regarding school employee retirement means to school employees. Keep contacting your legislator and let them know!