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White smoke from the Capitol as governor and Republican leaders make deal on teacher pensions

Jun 14, 2017

Credit Mercedes Mejia / Michigan Radio

A deal for the state’s budget and teacher retirement has been made.

Top Republican lawmakers and Governor Rick Snyder have been in a stalemate over what to do with the teacher’s retirement plan.

But now a deal is in place.

The current teacher retirement plan gives teachers the option between a straight 401K and a hybrid 401K and pension-type plan.

Bills in both chambers would let new teachers will get to pick between two plans. One is a 401-K with up to a 7 percent match. The other is a new hybrid plan with 50-50 cost sharing between employees and employer and a set rate of return on investment. The new rate of return is lower than the current hybrid option.

Governor Rick Snyder was against previous proposals by Speaker of the House Tom Leonard and Senate Majority Leader Arlan Meekhof. The lawmakers wanted to get rid of the pension component for all new hires and put them all on a straight 401K. The governor was staunchly against this idea and lawmakers shut him out of budget negotiations.

But now Snyder is back at the table. He supports the new plan and says they will also have a strong budget.

“This is teamwork,” he said. “This is a lot of good teamwork from a lot of staff people and a lot of members and a lot of people from the administration all working together in partnership.”

While some changes may be made to budgets that have already passed through conference committees, the spotlight will be on the new teacher retirement bills.

Speaker of the House, Tom Leonard says the current retirement plan has put the state into debt.

“As we look down the road, the biggest cost is continuing to dig this hole,” he said. “And what this plan does is ensure that we will no longer dig this hole. We will stop the digging.”

Democrats and many teachers argue that increasing the cost of a pension – which this plan does – would make the teaching profession less attractive. Leonard says teachers want portability, which the 401k option in their plan gives teachers.

“This is going to give them a much better defined contribution option,” Leonard said. “It’s going to give them a retirement that’s going to be portable, one that they can take with them. One of my biggest gripes about the current system, how it affects teachers, is this ten year vesting.”

The House and Senate have committee hearings on the bills scheduled for Wednesday morning.