NMU received funding as a part of Gov. Rick Snyder’s executive budget to help offset the rising costs of the Michigan Public School Employee Retirement System (MPSERS).
MPSERS is a benefit program that was started in 1945 with the intent of providing pension and retirement benefits for public school employees.
NMU, along with six other public universities, took part in the program from its inception. The benefits involved with the program have since been determined at the state level, leaving no room for NMU or any of the other schools to have a say in what is offered.
Newer schools that came into the system were not required to take part in MPSERS, said Gavin Leach, vice president of Finance and Administration at NMU. At first, the state fully funded the pension costs that came with the program, but funding decreased with time. In 1975, the state mandated that health care had to be included as part of the benefits in MPSERS.
“The governor is starting to address some of the increase for this year,” Leach said.
According to Leach, NMU annually pays about $4.7 million into MPSERS out of pocket and without any financial assistance.
The increase in cost to the program averages $300,000 to $500,000 each year due to the rising costs of health benefits and other contributing factors. While Gov. Snyder’s contribution is helpful this year, a long-term solution to MPSERS is required.
About $446,000 in funding is suggested to help put a dent in some of the increase in costs for the seven schools that are still participating in the program. The rest is still up to each school to provide.
Leach and other financial coordinators from the other universities have brought this issue up to the legislature several times. They are now looking at bringing in a new legislation for MPSERS that would rewrite the program to help with the financial burden that goes along with it.
“When they’re looking at making changes, they’re taking into account what was promised initially,” Leach said.
NMU currently has 220 employees participating in MPSERS, their oldest retiree being 108 years old. Schools participating in the program were able to close it to new members starting in 1995 to control what they could of the increasing financial burden.
Meanwhile, public K-12 schools still actively participate with the program. NMU then offered a new benefit program to employees instead, Leach said.
The new defined contribution program allowed for the university to have a set amount of contribution in place for each employee. It is then up to the employee to determine how they wish to invest that amount towards their future retirement, Leach said.
The university plans to fade out MPSERS with time and convert to using the new benefit program instead. If a solution to the MPSERS problem is not found soon, students might face an increase in tuition to help combat the rising costs of benefits that coincide with the program, Leach said.
