LANSING, Mich. - More newly hired teachers and other school workers would be steered into a 401(k)-style retirement plan instead of one that includes a traditional pension under a contentious bill that passed a critical test in Michigan's Republican-led Legislature on Thursday.
The Senate narrowly passed the legislation 21-17, with all Democrats and six Republicans opposed. The House could approve its own identical measure later Thursday, but a final vote must wait until next week.
Republicans said the legislation would fix the Public School Employees Retirement System by keeping debt in check and giving new hires a more generous and portable retirement savings account with no risk to future taxpayers.
Democrats and teachers unions criticized the bill, saying it would not address long-term liabilities and would make it harder to recruit new teachers. They also opposed provisions that would force new hires to bear more pension costs and that could eventually block them from any pension.
"This is the final nail in the coffin," said Sen. Coleman Young II, a Detroit Democrat, who called the bill "hideous" and said teachers deserve to retire with dignity. "What are we doing to this profession? ... This is too important a professional to play politics with."
Added Democratic Sen. Hoon-Yung Hopgood of Taylor: "There has not been a single study to suggest that this bill would save money."
The Senate bill's sponsor, Republican Sen. Phil Pavlov of St. Clair, stressed that it would not affect current employees and said it would better protect retirees, taxpayers and the profession. He denied that it is designed to keep people from picking a pension and said it would put the new pension system "on notice" that it should not become underfunded.
"We have an opportunity here to offer a greater retirement benefit, to secure our retirement system and the ability to manage it going forward," Pavlov said.
Starting Feb. 1, new hires would automatically default to a 401(k)-type retirement account like the ones that state employees receive. They would have 75 days to pick a hybrid pension-401(k) plan instead, but it would be costlier than what current teachers receive - though it is unclear by how much.
It also is unknown how many new hires would take the 401(k)-only plan. Currently, 20 percent voluntarily do.
Republican Gov. Rick Snyder is expected to sign the bill after reaching a deal with GOP legislative leaders earlier this week.
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