Pension Reform Case Study: Michigan

Michigan’s poor management of the pension reform process has directly led to the state’s growth in unfunded liabilities over the past two decades. A properly managed pension reform process would have added about $8.4 billion to the assets of state employee retirement plan as of 2015, meaning the plan would be overfunded instead of deep in the red.

Closing the state employee defined benefit plan has prevented the state from taking on even more unfunded liabilities than without a change. But the positive effects of pension reform have been muted by the failure to manage the defined benefit plan well as it is being closed over time.

Collectively, the process of reforming the Michigan State Employees’ Retirement System provides a number of lessons for policymakers today facing similar challenges to their pension plans.

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