E-flections of an Educator

Changing the Rules, Changing the Game: What’s Happening to Michigan Teacher Retirement?

Posted on: April 9, 2010

[NOTE: This is cross-posted at Literacy, Learning & Sharing.]

April 15, 2010 marks the 25th anniversary of my hire date in East Detroit Public Schools. In June 2010 I will have 26.1 years of service credit in the Michigan Public School Employees Retirement System (MPSERS), due to the year I spent as a substitute teacher prior to signing a contract in East Detroit.

When I decided to become a teacher, I knew I wasn’t going to make “the big bucks,” but thanks to the hard work of those who came before me in the labor movement, I knew I would be able to have a typical middle-class lifestyle and, once my working days were over, a pension with health care benefits.

In late 1986, public school employees had an option to become part of the Member Investment Plan (MIP), or remain in the Basic Plan.[1] Those who signed on for MIP have a percentage of their wages taken out for retirement (I believe it is around 3%). An important fact to note is that the percentage could be changed—which is the main reason some chose to remain in the Basic plan during the enrollment period. The fundamental differences in the plans are:

MIP members:

  • are eligible for full retirement at age 46 with 30 years of service
  • get a 3% cost of living increase in the annual pension
  • have their final average compensation (FAC) calculated using highest 3 consecutive years of earnings.

Basic members:

  • are eligible for full retirement at age 55 with 30 years of service
  • receive NO cost of living increase in the annual pension; if the plan’s investments exceed predictions over a period of years members may receive a distribution of the excess earnings (“13th check”).
  • have their final average compensation (FAC) calculated using highest 5 consecutive years of earnings.[2]

In February, the Office of the State Budget issued a proposal to reform the retirement system to include (among other proposals):

  • an increase in the pension factor from 1.5% to 1.6% for anyone eligible who retires between July 1 and September 1.
  • an increase in employee contributions up to 3% for all employees, effective July 1, 2010.
  • elimination of dental and vision coverage for retirees.
  • a service credit cap of 30 years, after which employees will be transferred into a separate defined contribution plan.

(Governor Granholm’s press release regarding the proposal.)

Since then, there has been wide speculation. I’ve heard everything from, “It’s not gonna happen.” to “The 1.6 won’t fly, but everything else will.” and variations on those themes. Most recently, both the Michigan House (HB 5953) and Senate (SB1227) have introduced bills. You can find detailed explanations in the AFT Michigan Capitol Report for March 2010.

Because I chose to keep my 3% and stay Basic, I chose:

  • working for 9 additional years (minimum age 55 vs 46)
  • potentially decreasing my FAC by having to average 60 vs 36 months’ earnings
  • no cost of living increase

It was my choice, and I’m totally OK with it. Here’s what I’m not OK with: if (when) “reform” passes, I will have to pay 3% of my wages into MPSERS, and still be Basic. Not only that, because I will not be 55 when I have 30 years of service, I must continue working without having those additional years accruing toward the calculation of my pension.

Hardly seems fair, changing the rules 23 years later. (I won’t go into the loss of the dental and vision.) It might even be a breech of contract. My choice was irrevocable—why can the state change?[3] Some are trying to spin the change as an “early retirement incentive” when in actuality it is a benefit reduction plan which reneges on promises made to current employees with regard to their retirement.

Michigan educators and public school employees, I urge you to contact your legislators and voice your opposition to these bills. Join the conversation here. Comment or write a blog post about your situation and link back. I’m also going to send a link to this post to my legislators as well as @govgranholm.

As of Wednesday, the House and Senate each passed their versions of the reform bill. Now we wait…no! Don’t wait! Contact your state legislators!


[1] All public school employees hired after January 1, 1990 are in MIP.

[2] Your Retirement Plan: A Member Handbook for Michigan’s Public School Employees (October, 2009)

[3] In 1991, a window of opportunity was provided for Basic members to “buy-in” to MIP; again, one-time only, irrevocable decision.

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3 Responses to "Changing the Rules, Changing the Game: What’s Happening to Michigan Teacher Retirement?"

I share your concerns about the “incentives” to retire amounting to a breach of contract. The primary conditions which define this are, I believe, acts which are “arbitrary and punitive in nature”. Sounds like a pretty good case for a class action law suit (Geoffrey F., we need you now!). There is another pretty good case to be made for age discrimination here ,too, not very well hidden by use of the term “incentive”. If these proposals are defined as incentives, what then would be deemed a “threat” or “harassment”? This is an issue which cries for a more open and transparent discussion. Otherwise, the blowback might just be a Statewide wildcat strike. Oops, better make that a succession of ‘”unannounced voluntary furlough days”.

Thanks for stopping by and taking time to comment, Randy. I hadn’t thought of it in terms of age discrimination. Interesting. Now that the House and Senate have each passed their versions, we’ll have to wait and see what the reconcilliation process brings.

OUR LEGISLATURE NEEDS TO VOTE YES IN GIVING THOSE MICHIGAN TEACHERS A SMALL INCENTIVE TO RETIRE WHO ARE ELIGIBLE AND ABLE, TO RETIRE! (1.5% TO 1.6%)

MANY, MANY SCHOOLS ARE CLOSING, AND MANY, MANY EDUCATORS ARE BEING LAID-OFF! (THERE HAS BEEN OVER 2000 TEACHERS IN DETROIT PUBLIC SCHOOLS PINK SLIP THIS WEEK!!)

WOULD OUR STATE OF MICHIGAN RATHER HAVE OUR STATE PAY UNEMPLOYMENT COMPENSATION FOR ALL THOSE LAID-OFF?

ALSO, OUR NEW COLLEGE GRADUATES, AND CHILDREN, ARE LEAVING THE STATE THAT THEY RESIDE IN TO LOOK FOR OPEN TEACHING POSITIONS!

IS THIS WHAT YOU WANT FOR MICHIGAN????

THIS SMALL INCENTIVE WOULD ALLOW THOSE TEACHERS A CHANCE, AND OPPORTUNITY, TO RETIRE!

PLEASE SUPPORT AND VOTE YES FOR THIS TEACHER RETIREMENT INCENTIVE! THEY CERTAINLY DESERVE IT!!

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