The mandatory 3 percent wage contribution for school employees already has led to a lawsuit.
The new retirement law also requires that all school employees in Michigan give 3 percent of their wages to the state to go toward future health care.
For example, a school employee with a $50,000 salary would be required to pay $1,500 a year. Over 20 years, that equates to $30,000.
If an employee is making under $18,000, the tax is lowered to 1.5 percent for the 2010-11 school year, then goes to 3 percent.
Michigan’s largest teachers’ union, the Michigan Education Association, lobbied against the bill as it passed through the legislature. MEA representatives argued that the bill would not result in as many retirements as the state hoped.
Mark Bergmooser, president of the MCCC Faculty Association, explained the mandatory wage deduction.
“It’s a pre-tax contribution,” he said. “Of course, it’s a forced contribution.”
What becomes troubling, he said, is that the state has offered no guarantee that the money will indeed go toward health care, or if it would be enough.
“This is 3 percent that’s being taken out to help fund health care for the future, but with no guarantee that it will be there,” Bergmooser said. “It makes me think when someone tells you there’s no guarantee for it that it’s not coming.”
Bergmooser said that health care is important enough that most school employees would be willing to sacrifice some of their wages for a good health care plan, but without the guarantee, he said he can understand why teachers’ unions have spoken against it.
“There is this attack on education,” he said. “You hear time and again that we need to improve, and better, and reform education.
“So you want to stimulate the economy through better educated people, but the people who do the educating, you don’t want to pay,” he said.
New school employees hired in Michigan may have to give as much as 11.4 percent of their wages toward their retirement.
“If people are being hired for the very first time here at the college, they’re going to be paying a little more into their retirement,” President Nixon said.
All new hires will enter into a hybrid retirement plan where they will have to pay $510 a year, along with 6.4 percent of their salaries, as long as they are above $15,000.
Another 2 percent or more is funded into a 401(k) plan with an employer match.
“In the state of Michigan, they obviously feel that you earn too much money, because they want to take more money away from you,” Bergmooser said.
Also, new hires could not retire with full benefits until age 60.
Currently, five MEA school employees from various areas of Michigan have filed a class action lawsuit against the Michigan Public School Employees Retirement System over the 3 percent pension tax.
“The unions are trying to stick up for peoples’ rights and to get their voices heard,” Bergmooser said. “Because, ultimately, it comes down to whatever power we can exercise, whether that be in a court of law or just a voice.”
