There Are Options to Address 'Transition Costs'

The Michigan Senate today approved an amendment that would offer school employees hired after Jan. 1, 2013, a defined-contribution retirement system instead of a defined-benefit plan. If enacted, this will limit Lansing’s ability to defer the costs of pension benefits to future generations.

News reports indicate that some senators were reluctant to close the defined-benefit system because of alleged “transition costs.” These represent changes in accounting assumptions that prevent the state from backloading payments to catch up on the state’s underfunded pension system.

But these are entirely optional, and the state has a number of options to address transition costs.  

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