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LANSING UPDATE

From: Ellen Hoekstra
Legislative Update
Re: UPDATE ON SCHOOL EMPLOYEE PENSION ISSUES
Date: September 29, 2008

SB 1450 to Diminish Community College Pensions

SB 1450 (Sen. Wayne Kuipers, R-Holland) would permit community colleges to withdraw their future employees from the Michigan Public School Retirement System (MPSERS). In other words, the legislation permits community colleges to offer future hires NO PENSIONS OR RETIREE HEALTH CARE AT ALL. The bill is in the Senate Education Committee, and we urge you to contact your senators and ask them to vote "NO" on this bill.

This legislation is being sought by the Michigan Community College Association (MCAA) and particularly by Washtenaw Community College. The bill has had two hearings before the Senate Education Committee in the last two weeks. AFT Michigan legislative director Louise Somalski testified in opposition to the bill before the committee, as did representatives of other unions representing school employees.

This proposed legislation is bad for prospective employees because:

• There would be no statutory requirement for them to have any retirement benefits at all;
• Even those current community college employees who are in the Optional Retirement Plan have no retiree health benefits at all;
• The recent steep and sudden decline in the stock market demonstrates the difficulties that retirees face if they are solely dependent on 401 K's to cover their needs as retirees.

AFT Michigan and other unions representing school employees have pointed out that community colleges should take into consideration the cost savings of the recently passed legislation that increases MIP contributions from 4.3% to 6.4% for income over $15,000 for employees hired after July 1, 2008. Likewise, the legislation requiring 22.5 years of full time service for new hires to qualify for fully subsidized retiree health care particularly reduced community colleges' costs because community colleges are heavily reliant on part-time faculty. Finally, one impact of such legislation would be to increase the retirement contribution costs for community colleges that choose not to participate in this program and for school districts.

This was one of the major topics addressed at a workshop on retirement issues co-hosted by AFT Michigan in late September.

Stock Market Impact on Pensions

Needless to say, the MPSERS fund like other investors saw the impact of the recently declining stock market. We have asked that the Bureau of Investments prepare a statement for school employees and retirees to describe the current situation and expect that statement shortly. In recent conversations with the Department of Treasury staff, it is clear that the fund's ability to invest in assets that do not correlate with the stock market has been helpful in softening the impact of declining markets.

In order to provide greater options for times when the stock market is weak, Representative Bob Jones (D-Kalamazoo) has introduced HB 6500, which has as its goal updating the public act that spells out the "legal list" of asset categories for all public pension plans in the state. We are hoping that this bill will be taken up quickly during the lame duck session after the election.

In the meantime, we would remind everyone that the fund's investment has a very long term horizon and that pension benefits are protected by the State Constitution - although our current Supreme Court does not agree that those protections extend to retiree health benefits.

New Vision Plan

If you haven't already received information in the mail and a new card for your Michigan Public School Retirement System vision plan, please expect to do so soon. The new plan is "EyeMed" vision care, which begins on October 1. The new plan will provide more convenient provider options than the current plan. If you have any questions about the new plan, you may call them directly at 866-263-1815.