In the late 90s and early 2000s, employers began to phase out their old retirement systems after more retirees were pulling from the system than there were employees contributing to it.

The State of Michigan has had three different retirement systems for school employees over the years:

  • The original system was a true, defined-benefit compensation program that retirees drew from after they turned 65. However, due to cost concerns, the state revised the system.
  • The revised system required teachers, administrators and support staff to contribute an additional three percent — but offered less benefits upon retirement. This was ultimately ruled unconstitutional by the courts, and the legislature went back to the drawing board to find a new solution.
  • The last — and current — school employee retirement plan is a hybrid plan that allows new employees to choose either a defined-contribution plan (401k) or a defined-benefit (pension) plan.

Rumor has it that the Republican-controlled legislature will try to remove the pension aspect from the new, hybrid retirement plan, even though analysts say the system is fully-funded. Democrats are concerned that removing the pension plan will make teaching uncompetitive, with current teachers moving to other states that offer better benefits.

Here’s an in-depth look at the current hybrid plan >>
Labor Voices: GOP plan destroys pensions