Teachers, Retirees Lose Big in Public School Pension Bill

Pension changes hurt teachers, families, new teachers
Wednesday, August 15, 2012

LANSING - House Democrats today said that Senate Bill 1040, which significantly changes teacher benefits for current and retired teachers, will significantly hurt new teachers, retired teachers, and will again harm Michigan women who make up the majority of teachers in Michigan public schools.

“Once again, the governor and Legislative Republicans have attacked retirees and women by passing a public school pension bill that will hurt retirees already living on a fixed income, and hurt middle-class families by short-changing teachers and making it harder for them to provide for their families,” said House Democratic Leader Richard E. Hammel (D- Mt. Morris Township).

SB 1040 would amend the Public School Employee Retirement System (MPSERS). The Republican version of the bill, which is on its way to the governor, would change retirement health care benefits for future employees hired either on or after September 4, 2012 and replace it with matching employer contributions of up to two percent of compensation deposited into a 401(k) account. Current employees will see an increase in the retiree health insurance premium contribution to 20 percent, capping the MPSERS premium share at 80 percent beginning Jan. 2, 2013, whereas the current cost sharing arrangement is approximately 10 percent. It also changes costs for current retired school employees under the age of 65 by increasing their retiree health insurance premium contribution to 20 percent and capping the MPSERS premium share to 80 percent.

The majority of teachers are women: 73.7 percent of current teachers are women, and 70 percent of retired teachers are women. Some may be may be the sole breadwinner or the primary breadwinner for their families. These significant changes will likely prove devastating and could seriously lower their standard of living making it difficult for them to provide for their families or themselves on their fixed retirement income.

“While there are many men who choose teaching, it is hard to look beyond that fact that the majority of teachers are women and this so-called teacher retirement ‘reform’ is yet another way to erode women’s salaries and their quality of life,” said Rep. Jim Townsend (D-Royal Oak). “This war they seem to want to wage is not going to help us attract new businesses and families to Michigan.”

These changes will also discourage any potential new employees from attempting to work in Michigan. Forcing current employees to take on the increased pension contribution rates will reduce their take-home pay, again making it harder for them to provide for their families.

“Attacking teachers this way is just another assault on our students who are already suffering mightily from the budget cuts imposed by the governor and the Republicans in the last two budgets,” said Rep. Ellen Cogen Lipton (D-Huntington Woods). “Michigan will not be a leader in anything if we don’t treat women, families and students well. This latest attack on teachers and schools will come back to haunt us in the future when we fail to graduate students who are ready for higher education and the workforce, and when we fail to provide a good quality of life for retirees.”

The average pension level for members of MPSERS is based on the average final earnings of the member along with the service credits earned while working. The current Comprehensive Annual Fiscal Report of MPSERS states that during fiscal year 2010-11 the total level of pension benefits paid was approximately $4 billion to a total of 187,722 pension recipients, leading to an average $21,189. The number of active employed members of MPSERS has declined by 23.8 percent between Sept. 30, 2001 and Sept. 30, 2010.