April 30, 2019, Introduced by Reps. Albert and Lower and referred to the Committee on Appropriations.
A bill to amend 1986 PA 182, entitled
"State police retirement act of 1986,"
by amending sections 11 and 14 (MCL 38.1611 and 38.1614), as
amended by 2018 PA 674.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 11. (1) The retirement board, in consultation with the
department, shall engage an actuary, in conformance with section
261 of the management and budget act, 1984 PA 431, MCL 18.1261.
(2) The actuary shall prepare an annual valuation of the
assets, liabilities, financial condition, and contribution rate of
the
retirement system, upon on
information supplied by the
department.
(3) The retirement board and the department shall conduct and
review an experience investigation study and adopt risk assumptions
on which actuarial valuations are to be based, after consultation
with the actuary, and the state treasurer. Beginning with the state
fiscal year ending September 30, 2021 and for each subsequent state
fiscal year, the actuary shall use the most recent mortality
assumptions provided by the Actuarial Standards Board and adopted
as risk assumptions under this subsection. The experience
investigation study must be periodically reviewed at least once
every 5 years.
(4) Every April 1 following a periodic review of risk
assumptions under subsection (3), the office of retirement services
on behalf of the department and the state treasurer shall
collaborate to submit a report to the senate majority leader, the
speaker of the house of representatives, the senate and house of
representatives appropriations committees, the senate and house
fiscal agencies, and the department of state police. A report
required under this subsection must be published on the office of
retirement services's website and include at least all of the
following:
(a) Forecasted rate of return on investments at all of the
following probability levels:
(i) 5%.
(ii) 25%.
(iii) 50%
(iv) 75%.
(v) 95%.
(b) The actual rate of return on investments for 10-, 15-, and
20-year time intervals.
(c) Mortality assumptions.
(d) Retirement age assumptions.
(e) Payroll growth assumptions.
(f) Any other assumptions that have a material impact on the
financial status of the retirement system.
Sec. 14. (1) The funding objective of the retirement system is
to establish and receive contributions during each fiscal year that
are
sufficient to fully do
both of the following: (a) Fully cover
the actuarial cost of benefits likely to be paid on account of
services rendered by members during the fiscal year, which is the
normal
cost requirements of the retirement system. , and finance
(b) Finance the unfunded actuarial costs of benefits likely to be
paid on account of service rendered before the fiscal year, which
is the unfunded actuarial accrued liability of the retirement
system, and health, dental, and vision insurance.
(2) Subject to subsections (5) to (7), the annual level
percentage of payroll contribution rate must be actuarially
determined using experience assumptions and level percent of
payroll actuarial cost methods adopted by the retirement board and
the department pursuant to an annual actuarial valuation, which
must be sufficient to finance benefits being provided and to be
provided by the retirement system. Beginning with the state fiscal
year ending September 30, 2021 and for each subsequent fiscal year,
the retirement system shall use layered amortization. As used in
this subsection, "layered amortization" means a fixed and closed
period that separately layers the different components to be
amortized over a fixed period not to exceed 10 years, as it
emerges. The amortization period for layered amortization must use
a level dollar amortization method.
(3) Subject to subsections (5) to (7), except as otherwise
provided in this subsection, for differences occurring in fiscal
years beginning on or after October 1, 2001, a minimum of 20% of
the difference between the estimated and the actual aggregate
compensation and the estimated and the actual contribution rate
described in subsection (2), if any, may be submitted in the
executive budget to the legislature for appropriation in the next
succeeding state fiscal year and a minimum of 25% of the remaining
difference must be submitted in the executive budget to the
legislature for appropriation in each of the following 4 state
fiscal years, or until 100% of the remaining difference is
submitted, whichever first occurs. Beginning in the state fiscal
year ending September 30, 2022 and each state fiscal year
thereafter, not less than 60 days after the end of the fiscal year,
the office of retirement services shall certify to the department
the difference between the estimated and the actual aggregate
compensation and the estimated and the actual contribution rate
described in subsection (2), if any. The legislature shall
appropriate the amount certified under this subsection in the next
fiscal year. In addition, interest must be included for each year
that a portion of the remaining difference is carried forward. The
interest rate must equal the actuarially assumed rate of investment
return for the state fiscal year in which payment is made.
(4) For each fiscal year that begins on or after October 1,
2003, if the actuarial valuation prepared under this section for
each fiscal year demonstrates that as of the beginning of a fiscal
year, and after all credits and transfers required by this act for
the previous fiscal year have been made, the sum of the actuarial
value of assets and the actuarial present value of future normal
cost contributions exceeds the actuarial present value of benefits,
the amount based on the annual level percent of payroll
contribution rate under subsections (1) and (2) may be deposited
into the health advance funding subaccount created by section 42.
(5) Beginning with the state fiscal year ending September 30,
2022 until the pension and retiree health care payroll growth
assumption rate is zero, the payroll growth assumption rate must be
reduced by 50 basis points. Beginning with the state fiscal year
ending September 30, 2022, the office of retirement services within
the department of technology, management, and budget and the
retirement board may agree to reduce the rate described in this
subsection by any number of additional basis points.
(6) Beginning with the state fiscal year ending September 30,
2019 and for each subsequent fiscal year, the normal cost
contribution rate must not be less than the normal cost
contribution rate in the immediately preceding fiscal year.
Additionally, the employer portion of the contribution rate must
not be less than the employer portion of the contribution rate in
the immediately preceding fiscal year.
(7) Subject to the requirements of this subsection, beginning
with the state fiscal year ending September 30, 2019 and for each
subsequent fiscal year until the unfunded actuarial accrued
liability is paid off, the unfunded actuarial accrued liability
contribution
sum and amount due and
payable must not be less than
the
unfunded actuarial accrued liability contribution sum and
amount due and payable in the immediately preceding fiscal year.
The unfunded actuarial accrued liability must be paid off no later
than September 30, 2038. Additionally, the employer portion of the
unfunded
actuarial accrued liability contribution sum and amount
due and payable must not be less than the employer portion of the
unfunded
actuarial accrued liability contribution sum and amount
due and payable in the immediately preceding fiscal year.
(8) Notwithstanding any other provision of this act, if the
retirement board establishes an arrangement and fund as described
in section 6 of the public employee retirement benefit protection
act, 2002 PA 100, MCL 38.1686, the benefits that are required to be
paid from that fund must be paid from a portion of the employer
contributions described in this section or other eligible funds.
The retirement board shall determine the amount of the employer
contributions or other eligible funds that must be allocated to
that fund and deposit that amount in that fund before it deposits
any remaining employer contributions or other eligible funds in the
pension fund.
(9) Beginning with the state fiscal year ending September 30,
2021 and for each subsequent state fiscal year, the actuary used by
the retirement board shall assume a rate of return on investments
of and a discount rate not more than 6% per annum, as of September
30, 2020, which rate may only be changed with the approval of the
retirement board and the director of the department.