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Member, Beacon International Group, Ltd.
LANSING, Mich.—The Republican-led Michigan House of Representatives approved legislation last week aimed at curbing the state's growing employee health care costs, including a proposed elimination of the state's retiree health plan.
The changes, approved in separate bills by votes of 63-45 and 63-44 on Thursday, would require state employees hired prior to 1997 enrolled in the current defined benefits pension program to contribute 4% of their pay to remain in the program, according to a statement from the state House's Republican caucus.
New hires after Jan. 1, 2012, as well as current employees that elect not to pay the required 4%, will be enrolled in a 401(k)-type contribution plan that would replace the defined-benefits program. The state would match contributions to the plan up to 2% of salary, according to the proposed bill.
Republican lawmakers said the proposed bill would reduce the state's spending on retiree health care by trading recurring payments after retirement to a one-time expenditure per employee.
"This legislation finally tackles the job of paying down our retirement debt and safeguarding retirement benefits for state employees," said Rep. Chuck Moss, chair of the House Appropriations Committee. "For years we put off making the hard choices necessary and allowed the debt to balloon to tens of billions of dollars. Today we put the system on a sound, sustainable foundation, and secured the benefits our employees count on after retirement."
The proposed bill also would end a rule requiring state workers to pay 3% of their wages into their retiree health plan.
The legislation also eliminates a recent law requiring state workers and public school employees to contribute 3% of wages to their retiree health care and refunds that money to all state workers.