Teachers to pay more for retirement, school districts get some relief

Aug 15, 2012

Teachers and other school employees will soon be paying more of their salaries for health care and pensions.

Governor Snyder is expected to sign bills that require school workers to pay four or seven percent of their salaries for retirement benefits, depending on what plan they have.

School employees will also pay more for their health insurance when they retire.

Randy Richardville is State Senate Majority Leader.

He says he understands that people aren't going to be happy about the changes. But he says something had to be done.

It's estimated the teacher retirement system is $50 billion underfunded.

"It's just the numbers, it's just a reality that has to happen," Richardville told Michigan Radio.  "And as difficult as that is to receive that news - over the long time it's better than watching your system go bankrupt."

Many teachers' unions opposed the changes.

But school administrators say the bills give them much-needed relief - a cap on the amount they must contribute for employee pensions. 

The cap is set at just under 25% of payroll.  Some districts were facing the prospect of paying nearly 30% of payroll towards pensions.

The state legislature plans to study whether to switch school workers to 401(k) retirement plans. The current plans are part 401(k) and part guaranteed pension.