Michigan Gov. Rick Snyder signed into law pension reforms for the state's public school employees on Thursday.
The law requires establishment of a new hybrid pension plan and new defined contribution plan for public school employees hired after Jan. 31, 2018.
The new plans will be part of the state's largest public pension system, the $44.7 billion Michigan Public School Employees Retirement System.
The new optional hybrid plan will use the same benefit calculations as the previous hybrid plan 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 new defined contribution plan will have similar features as the existing plan but will require a higher employer contribution. It will feature 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 state's School Aid Fund will pay for the 3% employer matching contribution. The current DC plan offers a 50% employer match up to 3% of an employee's compensation.
New public school employees hired on or after Feb. 1, 2018, may choose between the two new plans.
"Modernizing the school employee retirement system means these benefits will be there for retired school employees in the long term, while at the same time protecting taxpayers from escalating liabilities," Mr. Snyder said in a statement released Thursday.
"We worked hard to make sure everyone was at the table in discussions about how to best revise the system and I'm thankful for all of the input and collaboration that led to a great outcome for current and future retirees as well as all Michigan taxpayers," he added.
Steven Cook, president of the Michigan Education Association, said in a statement: "We continue to believe this complicated legislation was rushed through the process without proper analysis of the outcomes it will have for school employees and the state."
"The bill's passage (in the state Legislature) less than two days after introduction failed to carefully consider key concerns," Mr. Cook added, noting "the legislation fails to provide stability in the hybrid system and fails to pay down the unfunded liability so often decried by politicians."
