Benchmarking public employee benefit plans to the entire Michigan marketplace should be a priority given the changes reported with increased frequency in the private sector. As a reference, this paper presents a summary review of salaried benefit programs for 24 major Michigan employers in 2010. Such data should be used as a guide in designing sound and competitive benefit plans affordable to Michigan taxpayers. Based upon a review of the retiree benefit provisions of major salaried employers in Michigan, the comparison to MPSERS and MSERS reveals a significantly higher value in the MPSERS and MSERS retiree benefit provisions.
These problems of predictability and affordability in retiree benefits have become apparent in the private sector over the past 10 years, and companies have typically taken the steps necessary to develop costs that are affordable and predictable. An example is the widespread conversion from defined-benefit plans to defined-contribution plans and the significant scarcity of defined-benefit retiree medical plans.
Given the number of employees involved in MPSERS and MSERS (see Graphic 2), the public sector seems unlikely to sustain benefits systems that the private sector has considered unaffordable, especially since the public sector is dependent upon the private sector for funding these benefits. The public sector’s means of reconciling this is frequently seen in funding policies that defer such costs to the next generation.
To benchmark the MPSERS and MSERS pension and retiree medical plans, the author used data that was reported by large Michigan companies in the 2010 national employee benefit survey of major employers conducted annually by Aon Hewitt, an international human resources firm. The proprietary survey, known as Aon Hewitt Benefit SpecSelect™, reports benefits for the companies’ salaried employees.
This year, 24 major Michigan companies participated in the survey. The survey, while not comprehensive, included many well-known, publicly traded companies. The companies provided data for an average of 26,045 employees per company, though this skews high due to one particularly large participant; the median was around 10,122. Because of the frequent changes made to private-sector employee benefit plans, the most recent plan modifications may not be reflected in the current survey results.
Graphic 2: MPSERS and MSERS Members by Type as of Sept. 30, 2009
Source: “Michigan Public School Employees’ Retirement System 2009 Annual Actuarial Valuation Report” (Gabriel Roeder Smith & Company, 2010), D-1; “Michigan State Employees’ Retirement System 2009 Annual Actuarial Valuation Report” (Gabriel Roeder Smith & Company, 2010), D-1; “Michigan Public School Employees’ Retiree Health Benefits 2009 Annual Actuarial Valuation Report” (Gabriel Roeder Smith & Company, 2010), D-1; “Michigan State Employees’ Retiree Health Benefits 2009 Annual Actuarial Valuation Report” (Gabriel Roeder Smith & Company, 2010), D-1. “Inactive Vested” are not in the MPSERS and MSERS workforce, but have earned benefits that are payable at a future date.