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Michigan’s switch to a 401(k)-style public pension plan has saved the state up to $4.3 billion in unfunded pension liabilities, according to a recent study from the Mackinac centre for Public Policy.The report finds that the state’s 1997 pension reform, which ended defined pension benefits for new state employees, has cut the unfunded pension liability in half over the past 14 years, saving the state between $2.3 billion and $4.3 billion. The plan’s unfunded liability is currently about $4.1 billion.
The success of Michigan’s pension reform supports the argument for similar changes to the traditional pension plan now used by the state’s 260,000 public school teachers, the report’s author, Rick Dreyfuss, told the Lansing State Journal. That plan has an unfunded liability of $25 billion.
Michigan’s teachers’ unions have adamantly opposed the switch.
Michigan’s Republican Gov. Rick Snyder is also looking to trim the state’s unfunded retiree healthcare obligations by ending retiree healthcare insurance for state employees hired after 1997. Under his proposal, those workers would get lump sum payments ranging from $66,642 to $2,000.
State officials say the changes would shrink Michigan’s unfunded healthcare liability from $14.7 billion to $9.1. billion.
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