Governor Granholm Signs School Pension Reforms; Legislation Helps Address Structural Deficit in School Aid Fund

May 19, 2010

New plan will save billions over 10 years

LANSING - Governor Jennifer M. Granholm today signed into law legislation that reforms the Michigan Public School Employees' Retirement System (MPSERS) and takes a significant step in reducing the long-term structural imbalance in the School Aid Fund. School employees have until June 11 to indicate their intention to retire this summer under the provisions of this act.

"These critical reforms will save more than $3 billion for school districts over the next decade and ensure that we are able to fund education at a level that will help prepare students for success in the 21st century," Granholm said.  "In addition to helping resolve the structural deficit, it also will create thousands of job opportunities for new college graduates eager to teach in Michigan.  With this important reform behind us, I look forward to receiving a budget from the Legislature by July 1."

Under the legislation the MPSERS reforms will save districts nearly $680 million in the 2010-2011 school year and more than $3.1 billion over the next decade.  Those figures are based on an estimated 28,000 of the 56,000 eligible school employees choosing to retire between July 1 and September 1, 2010.  Specifically, the legislation:

• Provides for a slightly enhanced pension for up to 56,000 public school employees who choose to retire between July 1 and September 1, 2010. 
• Beginning July 1, 2010, all MPSERS employees will contribute 3 percent of their salary to be deposited into an irrevocable health care trust in addition to what they already contribute to the pension system.  Funds will be used to offset employer contributions for health care costs of current retirees.
• Employees hired on or after July 1, 2010, will be put in a new lower-cost defined benefit/defined contribution hybrid plan. 

Governor Granholm first proposed a retirement plan for school employees in January as part of her comprehensive plan to transform state government.  It was formally presented to lawmakers on February 11 as part of the 2011 executive budget recommendation.

The legislative package includes Senate Bill 1227 (PA 75) sponsored by Sen. Jud Gilbert (R-Algonac) and HB 4073 (PA 77) sponsored by Rep. Richard Hammel (D-Mt. Morris Township).

The bills were given immediate effect.

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