Retiree
Senate Passes SB 1040 – School Pensions to Cost the State More!
From the Coalition For A Secure Retirement:
Broken Promises: Michigan Lawmakers Pass Pension-Slashing Legislation with Higher Price Tag than Current Plan
Lansing, MI – On May 17, 2012, the Michigan State Senate passed pension-slashing legislation, Senate Bill 1040, that would undermine the retirement benefits of school employees and cost the state an additional $2-3 billion more than its current plan, according to the Michigan Office of Retirement Services. The bill’s expensive price tag stems from a defined-contribution amendment that would switch the retirement plans of public school employees hired after Jan. 1, 2013 to a sole defined-contribution plan.
In its report, the Office of Retirement Services concluded that the defined-contribution amendment carried a heavier price tag than the state’s current Hybrid retirement plan for school employees. Up-front costs of switching employees to defined-contribution would total $402 million in the first year alone, in addition to the one-time administrative price tag of $8-10 million. What makes the legislation more puzzling is that the costs of the defined contribution plan are higher than the existing Hybrid plan, meaning that as more school employees are enrolled, the costs to the system will increase – the exact opposite outcome from what the initial bill aimed for.
Moreover, SB 1040 would further shift pension and retiree costs onto the backs of active and retired school employees, and concurrently deliver a severe blow to the retirement benefits for future school employees.
“It is ironic that the state lawmakers, justifying their pension overhaul by lamenting budgetary burdens, passed a bill that will actually cost Michigan more than its newly enacted Hybrid plan,” said Gary Olson of Public Sector Consultants. “However, the real travesty is that the legislation undermines retirement security for future school employees. The consequences of these costs stemming from SB 1040 will include increased employer contributions, diminishing retirement benefits for future school employees, and higher state costs that will be paid for by taxpayers.”
The Coalition for Secure Retirement have called upon the politicians in Lansing to back off from the benefit cuts they are pushing and instead focus on solutions that will solve the structural problems in the public school pension system.
“This plan makes no sense. SB 1040 creates a ticking time bomb for Michigan school districts and community colleges. It ignores the real steps towards addressing the Michigan Public School Employee Retirement System (MPSERS) unfunded liability,” said CSR president John Olekszyk. “The Michigan Senate may have started out with an eye towards reducing pension costs for our schools, but today they just made the problem worse.”
Update on State Employee Retirement Bills
BREAKING UPDATE 12-15-11: HB 4701 (S-1) and HB 4702 signed by Governor Snyder.
The legislation refunds the 3 percent that state employees have been contributing to cover health care expenses. This issue is now moot due to the Supreme Court ordering it returned on December 14, 2011, the day before the legislation was signed into law. The new legislation imposes a requirement that all state workers under the Defined Benefit pension plan pay 4 percent of their salary towards the retirement plan or switch to the Defined Contribution retirement plan and not pay the 4 percent.
Workers in the defined contribution (401k) retirement plan would be given the option of switching to a new system for their health care beginning in January, 2012. Under the new system, employees will be allowed to contribute up to 2 percent into a 401k retirement health care plan, with the state matching another 2 percent.
State employees hired after January 1, 2012, will be placed into the new 2 percent healthcare match system with no access to any of the current retirement health care plans.
A great information resource is the Senate Fiscal Agency analysis of the bills which can be found at: http://www.seiu517m.org/files/2011/12/2011-SFA-4701-C.pdf
A complete record of the language and current status of the bills can be found at: http://www.legislature.mi.gov/(S(vfxwsz5501za5k32klwuwm45))/mileg.aspx?page=getObject&objectName=2011-HB-4701
Social Security’s Enduring Truths
By James Roosevelt, Jr., President of Tufts Associated Health Plans Inc.
Printed in AARP Magazine, June 2011
There is a saying that if you repeat something often enough it becomes the truth. Nothing better illustrates that point than the notion that Social Security will be bankrupted by the boomers.
Indeed, the generation of Americans born between 1946 and 1964, who drew their first Social Security checks in 2008, will place heavy demands on the system as they reach their retirement years. But this is also a generation that has been paying into the system since they started working in the early 1960s. Much of the money that boomers are and will be drawing from Social Security is and will be their own.
But these important factors are usually left out. Instead, the purveyors of fear want you to believe that boomers are retiring on the backs of their children and grandchildren. If you buy that, they have statistics showing fewer contributors supporting more beneficiaries – “proof” that the program is unsustainable.
These utter distortions, however, are nothing new. My grandfather had to contend with them. In the 1936 presidential campaign, the Republican nominee, Alf Landon, labeled Social Security a “hoax.” In dismissing the program as “unworkable,” the GOP platform of that year stated that Social Security would be unable to pay benefits to two-thirds of retirees. My grandfather would not be surprised by the fear mongering today. Indeed, Social Security’s critics have been casting the same aspersions on the program for 75 years.
Let’s take a true measure of where we are. Social Security has not only been the most effective government program, it has been the most responsible government program. Social Security costs are funded out of its own dedicated revenue stream. It does not and cannot borrow money to finance its operations. There is no deficit financing. Social Security is the epitome of Yankee frugality. It could not be better managed. The administrative cost is .09 percent. It returns more than 99 cents to beneficiaries on every dollar collected. I dare you to find a private retirement plan that can claim that.
By the end of 2010, the Social Security trust fund had a positive balance of $2.6 trillion. As a result of interest earned on the trust fund balances, the fund’s surplus will continue to expand to approximately $3.67 trillion at the end of 2022. After that year, it is projected that the balance will begin to decline. Still, reserves will be sufficient to pay full benefits through the year 2036. After that, Social Security would still be able to pay for 77 percent of benefits.
Since when is news that a program is completely solvent for 25 years bad news? Even in year 26 and thereafter it could still fund three-fourths of anticipated benefits. This is decidedly not a program that is broke or going broke. In fact, this is quite a remarkable achievement.
June 15th Is Older Michiganians Day!!
We will gather on the lawn of the Capitol at 9:50 am (there will be a tent). We will hear speeches then visit State Representatives and advocate for our platform issues. We will also honor the Senior Citizen of the Year. There will be an orientation on the platform issues before we visit our legislators.
If you have a ticket you will receive a box lunch and a T-Shirt. Lunch is from 11:30 – 12:00 noon. Tickets are free!!! You can reserve a ticket to be picked up the day of the rally by calling 517-887-1440 or you may pick up your ticket before June 15 at the Tri-County Office on Aging, 5303 S. Cedar Street, Lansing.
For information on the issues we will advocate, please visit the Older Michiganians Day website. Simply go to the web and type in: Older Michiganians Day.