‘Leadership’ more than just in the name at SLC
MEA has completed an analysis of the pension legislation signed by Governor Snyder in July:
- Unlike the initial versions of this legislation, new hires still have a choice between strictly a defined contribution (DC)/401(k)-style plan and a hybrid retirement system that combines a 401(k) with a traditional defined benefit system. The preservation of that choice is thanks to the massive outcry from MEA members across the state – well done and thank you!
- The hybrid option now contains more risk for both employees and employers, because of requirements that they split any shortfalls in funding. While there are protections in the bill to keep future Legislatures from deliberately underfunding the retirement system to cause hardship on educators and their districts, market crashes could cause additional out of pocket costs – and those costs do not have a cap, so they could be significant.
- The 401(k) option for new hires is improved under this legislation, providing more money from the employer up front and a better match for employee contributions. Current employees who previously chose the 401(k) option when they were hired will receive these increases. While this option falls short of being adequate for many members’ retirement needs, it does bring the school employee 401(k) up to equity with what state employees and legislators receive.
- New school employees will have 75 days to choose whether they want to remain in the 401(k)-only plan or opt into the hybrid plan. As we move forward, MEA will be doing more analysis on this legislation and providing documents to help new hires work through that decision – please stay tuned for more coming from MEA in the coming months on this issue, as well as any updates to the analysis document as we learn more.