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Legislation would force new Michigan teachers into a 401(k)-style plan

Sep 15, 2014

New legislation in the state Senate would close Michigan’s teacher retirement system to new teachers. Instead, all new teachers would get a “defined contribution” 401(k)-style plan.

Under a partial overhaul of teacher retirement approved by state lawmakers in 2012, new teachers can choose between that or a “hybrid” plan, which combines elements of a defined contribution plan and a traditional pension. The new legislation would end that choice, giving new teachers only the 401(k)-style defined contribution plan.

A state Senate panel will hear testimony on the legislation this week.

Republican state Sen. Mark Jansen, R-Gaines Twp., introduced Senate Bill 727. He says lawmakers should do everything they can to ease the burden of Michigan’s teacher retirement system on school budgets. 

Senator Mark Jansen, R-Gaines Twp, introduced Senate Bill 727.
Credit Michigan Senate Republicans

“They’re looking for a way to reduce their expenses, and this would be my intent: put more into education of the kids in the classroom and less on the legacy cost," said Jansen. "This would be the ultimate reform, I think, in my mind, anyway. And it would bring us the stability, I think, in the education system that we really, truly need."

Jansen says the legislation could save schools and the state billions of dollars in the long run.

Some school groups say they are not convinced the savings would be anywhere near that, or that there would be any significant savings at all. They say closing the existing retirement system to new teachers would come with big costs.

State Sen. Howard Walker, R-Traverse City, who chairs the Senate subcommittee which sets the chamber’s K-12 funding priorities, admits that switching all new teachers to a defined contribution plan “has costs,” and says it is too early to say whether he will hold a vote on the bills. But he says more needs to be done to curb the costs of teacher retirement in Michigan.