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LANSING UPDATE

From: Ellen Hoekstra
Legislative Update
June 17, 2012

RETIREE ALERT

Pension Bill Passes House - Stalls in Senate

SB 1040, the bill which makes major changes to MPSERS, passed the House on June 14 but was not taken up in the Senate that day...but for all the wrong reasons! Essentially, within the Senate Republican caucus, too many members were unhappy that the House-passed version does not include mandating defined contribution pensions for newly hired employees and did include privatization costs in the calculation of employer contribution rates. The legislature is now in recess until July 18. As a result of Senate inaction, school districts, community colleges, and seven of the state's universities will not know what their MPSERS costs will be when they put together their budgets before July 1 and retirees will not know what the final impact on their health insurance cost-sharing will be.

While it still transfers substantial costs to retirees and employees, the House-passed version is better than the Senate version in a number of ways, thanks to the continued pressure from AFT Michigan members and other organizations that are part of the Coalition for Secure Retirement-MI. These improvements in what is still a "very bad news bill" include:

• Retaining the "hybrid" pension plan enacted in 2010 for new hires.
• Restoring longevity pay and employer-paid tax sheltered annuities to income currently counted in calculating pensions (FAC).
• Reducing the health premium cost-shift for retirees on Medicare by January 1, 2013 from 20% to 10% for themselves and their dependents; currently Medicare eligible retirees pay only the Medicare premium for themselves and 10% for any dependents.
• Addressing two of the causes for underfunding by prefunding retiree health care and including the privatization part of "stranded" costs (though not the portion created by charter schools).
• Slightly reducing the increased contribution rates for employees to 4% for Basic members (Senate was at 5%) and to 7% for MIP members (Senate was at 8%).

The House passed version did nothing to address support staff's problem of paying the "flat rate" employee contribution and it still essentially eliminates retiree health care for new hires, creating the potential for a massive future problem. An overview of what the House-passed bill follows. We expect action by the Senate on this bill when it returns on July 18 and urge all retirees to ask their senators NOT to increase their retiree health care costs!

Ellen Hoekstra
Capitol Services, Inc.
June 18, 2012