Michigan Lawmakers Begin Move Toward Replacing Pensions with Self-Funded Retirement Plans

Turns out 2+2 really does equal 4, after all.

Lawmakers in Michigan have finally decided to recognize math for the immutable truth it is.

Michigan leads effort to shift workers away from pensions   The Seattle Times

A number of news outlets, including The Seattle Times, are reporting on Michigan’s efforts to move away from pension plans for public employees, and toward self-funded retirement plans like 401(k)s, in an effort to realize meaningful economic relief. Like so many other states, Michigan is dealing with massive financial pressures, including trying to determine how in the world it’s going to address the problem of unfunded liabilities that presently total $14 billion.   

Although Michigan has previously toyed with the idea of reshaping the retirement mechanisms there, and other states have made rather modest changes in their own public employee retirement plan structures, the Wolverine State is weighing more significant revisions that can be genuinely impactful in alleviating the tremendous burdens presently faced by the state in the form of pension and health care obligations.

Michigan actually brought an end to pension availability for new state employees back in the late 1990’s, but that change has not been enough to bring stability to the overall retirement fund structure of Michigan. Now, Republican legislators in Michigan plan to go one step further and figure out how they can move all new teacher hires, as well as local government employees, to self-funded, 401(k)-type retirement plans.

The actions being considered at the state level are supported by many local leaders within Michigan, as well.

“This is essentially a mortgage crisis. We can’t afford our payments, and they’re ballooning,” said James Freed, City Manager of Port Huron.

“We’ve already gone through 10 years of budget cuts,” Freed said. “At this point we’re not talking about cutting services. We’re talking about eliminating services.”

The information contained here is for general information purposes only. The Financial Writer blog and Bob Yetman disclaim responsibility for any liability or loss incurred as a consequence of the use or application, either directly or indirectly, of any information presented herein. Nothing contained in this article, or any other article featured at this blog, should be construed as a solicitation or recommendation to engage in any financial transaction. You should seek the advice of a qualified professional before making any changes to your personal financial profile.

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