Education Law

Michigan's New Teacher Retirement Law

Earlier this month the Michigan Legislature passed a new law affecting Michigan's retirement system for teachers.  The new law makes three significant changes: (1) offers an incentive for teachers who retire by September 1, (2) requires teachers to start contributing 3% of their salary into a retiree health plan and (3) creates a hybrid defined benefit and defined contribution plan for new school employees (i.e. those hired after July 1, 2010).  Up to this point, Michigan public school teachers, except for those working in public school academies (Michigan's version of charter schools), participate in a defined benefit retirement program.  New teachers will automatically have 2% of their salaries deducted for their defined contribution retirement plan, unless they choose to opt out.

The news reports say that up to 50,000 teachers in Michigan are eligible to retire under this incentive.  This is almost 1/2 of the 103,000 teachers in this state.  So it could potentially have a large impact on our teaching force.  The hope is to reduce costs for districts that are struggling financially by getting rid of expensive experienced teachers and hiring newer less costly ones. The average teacher salary in Michigan is approximately $54,000 while the average starting salary is $35,000.  The school district my kids attend said that they expect to save $30,0000 per teacher who decides to retire.  Of course the Michigan Education Association predicts that the retirement incentive, a higher retirement multiplier, is not enough to get anyone to retire who wasn't already planning to.  The business interests have praised the bill saying that it is a step in the right direction toward the needed structural reform in education.  The State is hoping that 28,000 teachers retire.

As a public employee with a defined contribution plan, I'm okay with educators having that type of retirement plan too.  Of course the recent dip in the stock market gives us all pause about our financial security in retirement. What I really don't like about this legislation is the mandatory 3% contribution for retirement health benefits because there is no guarantee that employees will actually receive these benefits in the future.  In my last post on employment issues, I said that employee compensation is an issue that needs to be considered in Michigan.  With this in mind, I do support the new retirement legislation as a way to address this issue without actually reducing the good wages that educators in Michigan receive.  And it would be wonderful if some of the new teachers who have been waiting in some cases for years for a full-time teaching position are able to secure them.  Rewarding experienced teachers with a retirement incentive is a good way to make this happen.

Here is a link to the law -- Public Act 75 of 2010 - http://www.legislature.mi.gov/(S(vb4trbrlyqcknzvtb2d3uo45))/mileg.aspx?page=GetObject&objectname=2010-SB-1227

Full post as published by Edjurist on May 26, 2010 (boomark / email).