Wednesday, September 29, 2010

MPSERS, The Pension Problems Grow

Announced today, the employer contribution required to bail out the Michigan Public School Employees’ Retirement System will jump from an already astronomical 19.41% to 20.66% beginning in October 1, 2010. That’s a 6.4% increase levied to schools that are dealing with funding cuts of 2% to 4% The 20.66% rate is charged to districts on every dollar of employee compensation and has displaced $4.8 billion from school operating budgets from 2007 to 2009.

The 20.66% rate is 3% higher than it would otherwise be because of the MEA’s legal action objecting to an employee contribution of 3% to help fund retirement health care costs. If the MEA succeeds in it’s legal action, it may have the perverse effect of killing this part of the pension plan. If the MEA fails in its legal action, the health care benefit may be preserved for retirees and contribution rates from the schools will fall correspondingly (which will have the positive effect of keeping more teachers employed).

The health care benefit embedded in the pension system represents the fastest growing cost and largest unfunded liability; this benefit is not constitutionally guaranteed.

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