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Retiree Network News

Articles from the AFT Michigan Forum

Volume 67 No. 4, Summer 2008

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The Evolution of Our Pension System
By John Olekszyk
Chair, AFT MI Retiree Network

The beginnings of the Michigan Public School Employees Pension System can be traced to 1895, when the Detroit Teachers created their "Retirement Fund". The initial contribution for teachers was not to exceed $10 per year and the maximum monthly benefit was $25.

A Michigan Teachers Retirement Fund for non-Detroit teachers was eventually established in 1915. A constitutional challenge was raised to the law and the Michigan Supreme Court ruled this innovate concept legal. The initial outstate membership was slightly less than 14,000 members.

During the 1920's the Detroit benefits increased to $1200 per year based on a 3% contribution not to exceed $45. During the same decade the law that created the Michigan plan was inadvertently repealed. Two years later it was reenacted just in time for the Great Depression. In 1937, the state system provided a minimum benefit of $600 and a maximum of $1200 for those with 30 years of service. The Detroit maximum for that year was $1320. In 1941, the Legislature created the Michigan Non-Teaching Public School Employees Retirement Fund and in 1945, PA 136 placed the Detroit system under the control of the state.

During the 1950's the minimum pension benefits rose form $750 to $1200. and in 1956, teachers were incorporated into the Social Security system. As a result of the Michigan Constitutional Convention held in 1963, public school employee's retirement benefits and service funding were included in the new Michigan Constitution.

In 1974, several major changes were made to the system including the introduction of a "Basic" non-contributory plan, the 10-year vesting requirement, the 1.5% benefit computation system, subsidized health care premium at a maximum of $25 per month and the formal merger of the Detroit system into the Michigan system which was eventually enacted into law in 1980.

In 1975, a Master Health Care Plan through Blue Cross/Blue Shield was provided for retirees.

In 1983, the first "13th" check was paid. In 1985, PA 91 created what is now called the MIP Plan which provided enhanced benefits for those who made a 4% contribution to the system. School employees were given a choice of Basic or MIP in 1986-87. Employees were offered another choice of the two plans in 1996.

In 1989, vision, dental and hearing benefits were added for retirees in the system along with the concept of the 5-year Universal Buy-In option.

During the 1990's MPSERS made a number of administrative and benefit changes to the program including a Managed Drug Prescription Plan (93), inclusion of some Public School Academy Employees (94), provided for the forfeiture of pension benefits for certain criminal activities (94), redefined what constituted compensation for purposes of establishing a retiree's FAC (96), and allowed for rehire of retirees on an "emergency" basis (99).

During the last decade MPSERS has in conjunction with BCBS enhanced the benefits available to retirees but those changes have also resulted in gradual increases in co-pays and deductibles. The incorporation of the Medicare Advantage Program in 2007 did provide a direct savings to the system of approximately $60 million.

The growth and evolution of our retirement system has been a long and difficult process and those of us within the system should appreciate the hard work and effort of those who came before us in making our benefit plan a model for systems in other states.

A special thank you to Bonnie Carpenter of MARSP for providing much of the background material for this article.