Lansing, MI (May 23, 2017): The state’s leading small business organization, the National Federation of Independent Business (NFIB), announced strong support today for legislation that would put an end to the ongoing liability of the Michigan Public School Employees Retirement System (MPSERS), the state’s teacher pension system, by closing it to newly hired teachers and replacing it with a 401(k)-type defined contribution plan. The legislation was introduced today by Senator Phil Pavlov in the Senate and Representative Thomas Albert in the House
“The cost and liabilities associated with a defined benefit pension plan have caused them to become rare in the private sector in favor of ‘defined contribution’ plans, such as 401K plans, that require employees to contribute to their own retirement plan – usually with an employer match up to a certain amount,” said Charles Owens, NFIB/Michigan State Director. “Most government defined benefit plans are underfunded and in economic distress because politicians from both parties continue to make pension promises they cannot keep with taxpayer dollars.”
Owens said that a survey of small business owners on the subject indicates that they are tired of their taxes being used to pay for defined benefit pension plans for government employees while most private citizens are in defined contribution – 401K type plans. State employees were moved from their defined benefit plans to defined contribution plans in 1997.
When asked: “Should government employee pensions be converted to defined contribution plans?” 92 percent of respondents said “YES”, 6 percent said “NO” and 2 percent were undecided. A copy of the survey question can be found HERE.
“We support efforts by lawmakers to move to defined contribution pension plans for teachers so that taxpayer money can meet other school funding needs rather than be used to prop up these unsustainable pension plans,” said Owens. “In addition, it is unfair for newer teachers to be forced into a pension plan that primarily benefits teachers that are already retired or nearing retirement while they themselves will likely never benefit because of the long vesting requirements.”