Amway President Doug DeVos recently announced a plan to move Michigan public employees to a 401(k) style defined contribution retirement plan. He labeled his proposed elimination of public employees’ defined benefit pension plans as the No. 1 priority of his West Michigan Policy Forum, adding “It sends a message to all of our elected officials. We take these votes very seriously.”
The DeVos family contributed nearly $1.5 million to Republican legislative candidates in the August primary—which is a down payment on the votes needed to gut school employee and municipal government employee pensions.
Visit Michigan Campaign Finance Network’s Donor Tracking to see how much the DeVos family has given to your legislator.
The pension system is not broken
Ten years ago, the Michigan Public School Employees’ Retirement System (MPSERS) was fully funded. Now we have an unfunded liability (which has been improving) as the result of the devastating economic downturn of 2008, combined with decisions made in Lansing to balance the budget with unrealistic projected rates of return. Like any investment, it simply needs time to rebound — and is on track to do so.
Recent changes have dramatically increased employee contributions into MPSERS. PA 300 of 2012 placed school employees hired after its effective date into a “hybrid” system, combining elements of a traditional pension and a 401(k)-style defined contribution plan. It also eliminated retirement healthcare benefits for new hires. The savings to the state stemming from this change will not be fully realized for several years. As with any investment, if left alone the system will heal itself.
The hybrid system is fully funded. Why would we eliminate a system that’s working?
Pensions provide important economic benefits
45% of public school employees receive a pension of less than $14,500 per year. Pension income is spent in Michigan and supports more than 77,000 Michigan jobs and $11.1 billion in economic output in Michigan.
A pension system distributes both the risk and reward evenly – vs. the winners/losers system of the 401(k). We don’t need a competitive system that creates winners at the expense of others; we need retirement security for all.
Numerous studies have shown that, in addition to being much less secure than a traditional pension, any savings to the state for making such a change would not be realized for more than 30 years – and the immediate cost to close MPSERS would run into the hundreds of millions of dollars per year.
Hedge fund managers and other Wall Street corporations are the real winners in eliminating traditional pension plans and moving money to their 401(k)’s. Why would a billionaire attack public employee pensions?