Sen. Pavlov introduces MPSERS reform

LANSING, Mich. — Senate Education Committee Chairman Phil Pavlov on Tuesday introduced legislation to reform to the Michigan Public School Employees Retirement System (MPSERS) and solve its $29.1 billion unfunded liability.

“Michigan has promised secure retirement benefits to more than 400,000 public school teachers and staff statewide, but the pension system we built to do that is failing them,” said Pavlov, R-St. Clair Township. “Over the last two decades, the school retirement pension system has racked up nearly $30 billion in debt. Despite our efforts to control the costs and reduce this debt, it continues to get worse and the retirement costs are already impacting our schools and threatening resources meant for the classroom to teach our children.”

“I am introducing long overdue reforms that will ensure our promises are kept to our school employees and retirees and also protect vital funding for educating our children.”

Senate Bill 401 would place all public school employees hired after Sept. 30, 2017 into a defined contribution retirement plan modeled after the plan that is offered to state employees hired since 1997.

Under the reform, a public school employee would have their employer contribute 4 percent of the employee’s wages into a 401k plan. The employee could then contribute another 3 percent, which would be matched by the employer — for a total of 10 percent each year. The employer match would be covered by the state.

“By putting MPSERS on the path to solvency, the reform will ensure that the state can meet 100 percent of the promises made to retirees and current school employees,” Pavlov said. “Current and retired public school employees who dedicated their lives to the critical task of educating our children will see no change to their constitutionally protected pensions.”

Pavlov said that the plan also benefits new, younger school employees by giving them a modern retirement that they can control and rely on.

“My reform would provide new teachers and school employees with a retirement benefit that is flexible and fully portable,” Pavlov said. “New employees would have the opportunity to own and build their retirement nest egg on their terms. The retirement accounts would be professionally managed and invested according to each employee’s individual goals.

“Most importantly, the reform would improve retirement security for all teachers, eliminate all financial risk to taxpayers over time and create the opportunity to put more money into the classroom. Frankly, we cannot afford not to reform MPSERS.”