Michigan lawmakers OK steering new teachers into 401(k) plan

(AP) — The Michigan Legislature on Tuesday narrowly voted to coax more newly hired school employees into a 401(k)-only benefit instead of one that includes a traditional pension, a move that majority Republicans said will keep the state from accumulating more debt and modernize a major public-sector retirement system.

GOP Gov. Rick Snyder is expected to sign the bill, which cleared the House 55-51 along party lines and will go to his desk after a procedural step in the Senate.

Starting in February 2018, the measure will automatically enroll employees into a more generous 401(k)-only plan like what state workers receive — a 4 percent employer contribution and up to 3 percent more if they kick in 3 percent — unless they opt out within 75 days and instead pay more of their salary toward a pension than current workers do.

[...] Democratic Rep. Sherry Gay-Dagnogo, a former teacher from Detroit, said: We are compromising a retirement system that was designed to give educators a reasonable allowance to cover their cost of living in their senior years, yet now we've deemed that an unworthy venture.

Snyder and legislators in 2012 forced existing school workers to pay more toward retirement or receive a smaller pension, eliminated cost-of-living adjustments for new hires, and ended their retiree health insurance and replaced it with extra contributions to their 401(k).