Last spring, the Legislature adopted a largely-gutted version of a modest school employee pension reform proposed by Gov. Jennifer Granholm in
January. One of its features is what the governor and her speechwriters
labeled a "hybrid" retirement plan for newly hired teachers, one that
supposedly falls midway between a traditional "defined-benefit" pension and the
modern "defined-contribution" or 401(k)-type plans.
The term "hybrid" is bogus. It's a political label, not
It's just like "a little bit pregnant": There's no such
thing — either a woman is pregnant or she's not. Period, end of story.
Michigan's retirement plan for new teachers is fully
pregnant with a defined-benefit pension plan that piles new liabilities onto
taxpayers. Tacking on the extra added benefit of a new taxpayer-contribution
into a 401(k) type account for these employees doesn't change this reality.
Not that the new defined-benefit system isn't an improvement
over the one that still applies to current school employees. It raises to 60
the age at which retirees collect monthly pension checks, compared to the
current age of either 55, or no minimum for many school employees with 30 years
on the job. It also slightly lowers the basis on which the pension is
calculated, cancels for the new guys some other gimmicks that current employees
can still use to boost benefits, and eliminates post-retirement cost-of-living
increases. These reforms will save taxpayers' money.
Still, hardly any new private sector workers get
defined-benefit pensions anymore. For the most part there is only one class of
employees who still do: government and school employees.
(Interestingly, that does not apply to Michigan
state employees hired since 1997, who all are in a real defined-contribution system, not a phony "hybrid." At the time, Gov. John Engler tried to get
this for school employees also, but was defeated by the MEA union's
political clout in Republican legislators' districts.)
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