By CAITLIN COSTELLO
Capital News Service
LANSING– Community colleges would save money in the public schools employees retirement system if a Senate bill passes, according to the sponsor, Sen. Wayne Kuipers, R-Holland,
The bill would give community college boards the option of providing a defined contribution plan instead of defined benefits, said Mike Hansen, president of Michigan Community College Association.
Laura Coleman, president of Bay de Noc Community College in Escanaba, said, [The public schools system] “continues to cost the college a tremendous amount of money, because we pay so much into a system that many employees don’t even get benefits from.”
In a defined benefits system employers and employees contribute a set percentage of salaries and know how much their benefits will be when they retire. Under a defined contribution system, both still pay in but will depend on investment results, according to House Fiscal Agency.
Under the proposed option, community colleges would save money because they would not longer have to make up for investment losses, said Hansen.
The union representing many community colleges faculty and other employees oppose Kuipers’ bill. Kerry Birmingham, a media relations specialist at the Michigan Education Association (MEA), said the change would jeopardize the financial stability of existing plans.
But Kuipers and Hansen said that taking so few people out of the state system would have little to no impact on its stability.
“If you took a bucket of water out of Lake Michigan, theoretically the water level goes down, but with such a small amount taken out at a time, you will hardly be able to notice. This idea works the same way,” said Hansen.
Community colleges account for less than 5 percent of the state program’s participants so it would be a good way to move toward a contribution benefit plan for all public school employees, Kuipers advocates.
Kuipers said there would be up-front costs to move all public school employees to a combined benefit system, but it would be worth it in the long run.
“If we had additional money to put into this, it makes a lot of sense to do for the long term stability of the educational retirement system,” he said.
Legislation to take all public school employees out of defined benefit plans has been unsuccessfully proposed before, Kuipers said, so now the focus is on community college employees.
Coleman, Bay de Noc president, said state university employees were allowed to withdraw from the defined benefit system previously, so community college employees should be given the choice too.
But, MEA’s Birmingham warned that, new community college employees would lose benefits under the switch.
“When you take away benefits from any employees you’re going to have a harder time recruiting the best and the brightest to work at community colleges,” she said.
Coleman said the most Bay de Noc employees would prefer the option of a contribution plan, because they would get immediate pay back for money they put in, instead of having to wait at least 10 years to become eligible for defined benefits.
Hansen also stressed that local boards would be able to decide whether to enter the contribution system or stay in the current system.
The legislation is supported by a number of Michigan organizations, including Detroit Renaissance and Center for Michigan, Hansen added.
“As the budget continues to deteriorate, we need to enact some kind of structural reform, and this could be it,” he said.
The bill is pending in the Senate Education Committee.