Senate Majority Leader Randy Richardville said Wednesday he supports moving all newly hired public school employees into a 401(k)-style retirement plan and closing the pension and health care plan.
“Tell the Mackinac Center that, OK?” Richardville quipped to reporters, referencing the Midland-based free market think-tank that has called for ending the traditional defined benefits of the Michigan Public School Employees Retirement System. “It’s what most of the private sector is moving toward, it’s what the Legislature has. Just in general, we’re trying to correct promises that were made that couldn’t be kept by previous Legislatures.”
Richardville’s endorsement of 401(k) plans for public school workers was the biggest development Wednesday in the Michigan Senate after several hours of closed-door negotiating over a bill to overhaul MPSERS, which faces a projected $50 billion unfunded liability for pension and health care benefits.
State Sen. Mark Jansen, R-Grand Rapids, said Tuesday he will offer an amendment on the Senate floor that would institute 401(k) employees hired after Jan. 1, 2013. MPSERS has more than 444,000 retired and active workers in public schools, community colleges, seven universities and some charter schools and public libraries.
Senators delayed voting on Senate Bill 1040 until Thursday to refine the language and get a fiscal impact of the proposed reforms, Richardville said.
Senate Republicans met in closed-door caucus meetings three times Wednesday — discussing the MPSERS bill at least twice.
“One of the members got up and said ‘You know 24 hours more to be prepared and make sure we don’t make a mistake is wisdom versus anything else,’” Richardville said.
The state of Michigan closed its employee pension plan in 1997 and instituted 401(k) retirement plans. The legislation pending before the Senate would increase pension contributions for current employees, require all retirees pay 20 percent of their health insurance premiums and eliminate retiree health care for new workers.
Pension experts have warned there may be millions in upfront costs to close the pension system because new hires would no longer being paying in to support the current retirees.
“Well, there are going to be some upfront costs, but you know like anything, it’s like closing cost on a lower-rate mortgage,” said Richardville, R-Monroe. “Yeah you’ve got to suck it up a little bit now, but over the long run … everybody talks about kids and grandkids. This actually does something for the classrooms of kids and grandkids.”
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