Dreaming of Retirement
Dreaming of Retirement

Teachers Pension Qualified Roll-Over

Tentative deal reached on big changes in Michigan's teacher retirement system

Senate Republicans have agreed - for now - to hold off on their plan to move newly hired school employees into a 401(k)-only retirement plan, keeping intact a hybrid pension/401(k) system that has been in place since mid-2010. Older workers will remain in a pension-only, or defined benefit, plan regardless.

House Republicans and Snyder have balked at switching to a 401(k)-only plan - like what was done for new state employees in 1997 - after estimates showed it could cost $1.4 billion in the first six years.

That is because accounting standards say that when a public pension system is closed, the government should increase contributions to the fund to offset lost payments from employees not entering the system.

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Story Date: 06-14-12


Michigan Senate holds off on pension reform vote, educators say they'll now plan budget cuts

State Senators backed away from a plan to overhaul teacher retirement and healthcare plans, frustrating educators who say they'll now have to cut budgets and state House leaders who said they had agreed to a deal.

House leaders also were frustrated, because they believed they worked out a compromise after weeks of talks with the chamber on the other side of the Capitol.

Take the next step"We're not trying to attack teachers, we're trying to save the system," said state Rep. Chuck Moss, R-Birmingham. "System is unsustainable. The system is about to crash. This is not the time to flinch from reality."

The deal called for doubling health insurance premiums for school retirees; eliminating health coverage in retirement for new workers hired after July 1 and instead putting an extra 2 percent of their compensation into a 401(k) plan; and "prefunding" retiree health benefits.

Teachers union leaders blasted the House vote, with Michigan Education Association President Steven Cook calling it the "single worst attack on school employee retirement security in history."

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Story Date: 06-14-12


Michigan Senate votes to end pensions for new school workers

New employees instead would be offered a 401(k)-style plan. The legislation, approved 20-18, next heads to the GOP-led House.

Minority Leader Gretchen Whitmer, D-East Lansing, said the GOP is acting under the "guise" of saving money when the switch to a 401(k) system would cost billions over the next two years. That is because there are hundreds of millions of dollars in upfront costs that come with making the switch since no new members are joining the existing pension plan.

The bill has a host of changes designed to address a $45 billion unfunded liability in the Michigan Public School Employees Retirement System.

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Story Date: 05-17-12


Helpful Links:

IRS Required Minimum Distribution (RMD) Question & Answers:

CDC Life Expectancy Chart
Life Expectancy Chart in PDF

Office of Retirement Services


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