LANSING, Mich. - Following action by the state Legislature early today, thousands of Michigan school employees now must decide whether to retire this summer with higher pension benefits or remain on the job and contribute more to a retiree health care plan, according to The Associated Press.

As part of an effort to reduce the cost of public education, the Legislature adopted a bill intended to coax older, higher-paid teachers into retirement and save money by replacing some of them with beginning teachers at lower salaries, AP reported in an article posted at mlive.com. In addition, new school employees will be placed into a hybrid retirement plan that combines a defined-benefit pension with a 401k-style contribution.

Legislative fiscal agencies estimated that the plan could save more than $670 million in the next fiscal year, depending on how many of 50,000 eligible employees retire, and about $3 billion in the coming decade, AP reported.

The plan would increase benefits by raising the multiplier used to calculate payments from 1.5 to 1.6 percent for employees who are currently eligible to retire. Employees whose age and years of service add up to 80 also would become eligible to retire under the new plan; their multiplier would be 1.55, AP reported.

The Michigan Education Association said it doubted that the "sweetener" would be enough to entice teachers to retire, according to AP. 

SOURCE:
The Associated Press, "Michigan Legislature OKs school retirement plan that could save more than $670 million," May 14, 2010

FURTHER READING:
Michigan Capitol Confidential, "Analysis: Michigan Senate GOP Fumble May Create $25.9 Billion Taxpayer Liability to Satisfy MEA," May 10, 2010

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