• Study: Michigan is one of 34 states under-funding pensions, with states looking at $757 billion hole

    Comments:  | Leave A Comment

    GRAND RAPIDS, MI — Michigan’s liability for public employee pensions are rated as a “serious concern” by a Pew Center study, noting that the state is among those contributing to a national $757 billion hole affecting millions of workers.

    The study notes that 34 states including Michigan have failed to maintain what the center considers to be safe levels of funding for pension and retiree health care funds.

    The center said experts call funding about 80 percent of long-term obligations, and listed Michigan as paying 72 percent, underfunding the plan each year between 2005 and 2010.

    The report notes that Michigan faces a $45 billion bill for retiree health care costs, but has funded 3 percent, well below the national average of 8 percent.

    Nationally, states face a $627 billion shortfall in retiree health care services.

    A bill making additional changes to the plan was approved in the state House week before last, and is expected to be taken up by the state Senate on July 18.

    The sides have agreed in principle on a plan that included Senate Republicans holding off on their plan to move newly hired school employees into a 401(k)-only retirement plan, keeping intact the hybrid pension/401(k) system. Older workers will remain in a pension-only, or defined benefit, plan regardless.

    The deal called for doubling health insurance premiums for school retirees; eliminating health coverage in retirement for new workers hired after July 1 and instead putting an extra 2 percent of their compensation into a 401(k) plan; and “prefunding” retiree health benefits.

    The bill would have allowed districts to pay an amount equal to 24 percent of each employee’s salary into the system and would have locked in that number as a cap.

    Without the reforms, that percentage jumps up to 27 percent this year, and analysts project it could climb to nearly 35 percent in several years.

    The Pew Center on the States is a non-partisan research and advocacy organization that provides technical assistance to states on fiscal issues.

    Read the entire article by Dave Murry on MLive

    Join the Conversation! Share and Discuss!

    Tags: »

    • More Related Content

    Comments

    blog comments powered by Disqus
    Follow

    Get every new post delivered to your Inbox.

    Join 207 other followers