Teachers’ Early Retirement Bill for Michigan Teachers:
Some Good News, Some Bad News:
May 14, 2010. My Dad used to say not much good is going on at four in the morning. He might be partly right as it applies to Michigan politics. At 4:25 AM on May 14, 2010, the Michigan Legislature passed an early retirement bill for teachers. Some good news, especially for teachers at retirement age. Some good news for districts, who can save money. Some bad news for newer hires and for kids, who will lose a lot of qualified people.
Here’s the deal as I understand it:
Teachers and school employees who retire between July 1 and September 1, 2010 who are age 55 and over and have at least 30 years of service (include purchased years) can calculate their pension benefits at 1.6% instead of 1.5%. This adds about a 6.6% sweetener to the pension. I figure about $200 a month for an average teacher with 30 years.
If the teacher or school employee is not eligible for normal retirement, but their age plus service adds up to 80 or more, they can use a 1.55% multiplier (a 3.3% increase).
For those who don’t retire, they must now contribute 3% of pay toward retirement health care. New hires would have to pay as much as 11.4% toward their retirement. I figure for my friends who are teachers with 30 years with a Masters degree, making about $80,000, the deal is worth about $4,800 more a year, or $400 a month. If I capitalize that at 5%, for a 56 year old teacher, it’s worth about $75,000 in today’s dollars. That doesn’t account for the fact that the teachers or school employees’ pension is not subject to Michigan income tax. I’m telling my eligible friends to take it.
So, it’s good for a retirement eligible teacher, and it’s also providing a job for a new teacher. I like that too. The districts can save the differential on the pay between a new teacher and a seasoned teacher with advanced degrees.
Who loses? Teachers who are not retirement eligible now go back to their old system and now have to contribute to retiree health care. If anyone thought that retiree’s health care was safe for state employees in this State in this economy, I’d suggest that that was coming a while back. I also see the difference between someone with great experience teaching kids and a brand new teacher. I like the new and fresh ideas of the new teacher, but I also like the sage wisdom of a mature teacher.
Some other provisions of the Bill:
•The new hires have a hybrid pension plan that has an employee contribution of $510 plus 6.4% of their salaries above $15,000. They also get a 401(k) plan where they contribute 2% of pay with an employer match;
•New hires can’t retire with full benefits until age 60;
•Charter school employee are not part of the new retirement plan;
•School retirees rehired by their district can’t draw their pension benefits. This was the former ‘double dip’ where a district could rehire a retiree at a lower cost. I don’t see anything wrong with it and wonder why the Legislature does.
All in all, the Teacher’s Retirement Bill is another sign of the changing times. For retirement eligible, it certainly has a financial incentive. It certainly helps balance the budget. But does it really help Michigan have an educated population?
I’m calling up my fishing buddy who’s a teacher and telling him to get his gear in order: he’ll be using it a lot more now. As to my kids, I’ll be keeping a closer eye on their lessons.