A bill reforming the pension benefits of Michigan public school employees was sent to Gov. Rick Snyder for his signature Thursday.
The bill, which passed out of the state Legislature on June 21, establishes a new defined contribution plan and a new hybrid pension plan for participants and beneficiaries of state's largest public pension system, Michigan Public School Employees Retirement System, with combined assets of $44.7 billion as of March 31.
The breakdown of MPSERS' assets by defined benefit plan, defined contribution plan and hybrid pension plan could not be learned.
The bill's major effects, according to legislative analysis by the state's House Fiscal Agency, include replacement of the current optional hybrid pension plan, established in 2010, with a similar plan for employees hired after Jan. 31, 2018.
The new plan uses the same benefit calculations but adds a 50%/50% cost share between employer and employee, including unfunded liabilities, plan assumption changes and changes to the retirement eligibility age.
The assumed rate of return for the hybrid plan will be 6% annually.
The current defined contribution plan, set up in 2012, would be replaced by a new plan for employees hired after Jan. 31, 2018, which is similar to the existing plan but will require a higher employer contribution, according to the HFA analysis.
The new defined contribution plan features an automatic employer contribution equal to 4% of an employee's salary and a 100% matching contribution up to 3% of an employee's salary. The bill requires that the state's School Aid Fund pay for the 3% employer matching contribution.
The current defined contribution plan offers a 50% employer match up to 3% of an employee's compensation.
Public school employees hired on or after Feb. 1, 2018, may choose between the new hybrid pension and defined contribution plans.
Sources expect Mr. Snyder to sign the bill.