Bill Text: MI HB6060 | 2023-2024 | 102nd Legislature | Engrossed
Bill Title: Retirement: public school employees; defined benefit plan and retiree health for new hires and election option for current employees; provide for. Amends secs. 4, 5, 43a, 81d & 91a of 1980 PA 300 (MCL 38.1304 et seq.) & adds secs. 69h, 81e & 81f.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Engrossed - Dead) 2024-12-18 - Referred To Committee On Government Operations [HB6060 Detail]
Download: Michigan-2023-HB6060-Engrossed.html
Substitute For
HOUSE BILL NO. 6060
A bill to amend 1980 PA 300, entitled
"The public school employees retirement act of 1979,"
by amending sections 41b, 81c, 81d, and 84 (MCL 38.1341b, 38.1381c, 38.1381d, and 38.1384), sections 41b and 81c as amended by 2017 PA 92, section 81d as amended by 2023 PA 250, and section 84 as amended by 2012 PA 300, and by adding section 69h.
the people of the state of michigan enact:
Sec. 41b. (1) Beginning July 1, 2010, the retirement system may determine a separate employer contribution rate for members who first became members on or after July 1, 2010 and before February 1, 2018. Except as provided in this section, the retirement system shall determine the separate employer contribution rate in the manner prescribed in section 41.
(2) Beginning February 1, 2018, the retirement system shall determine a separate contribution rate for members who first became members on or after February 1, 2018. Except as provided in this section, the retirement system shall determine the separate contribution rate in the manner prescribed in section 41, except that any increase or decrease in the unfunded actuarial accrued liabilities associated with members who first became members on or after February 1, 2018 must be amortized on a 10-year level-dollar schedule with a new contribution rate calculated for each year.
(3) All normal cost and any unfunded actuarial accrued liability contributions as determined under subsection (2) must be paid on a cost-sharing basis of 50% by the employer. and 50% by the employee. Except as provided in this section, contributions shall be made in the manner prescribed in section 42. An employee contribution for unfunded actuarial accrued liability must not be assessed to an employee based on any portion of an unfunded liability caused by the failure of an employer to make a required contribution. Following the determination of the cost-sharing basis under this subsection, section 41(2)(c) and (e) applies.
(4) The contributions of a member for unfunded actuarial accrued liability must be treated as picked-up contributions under the internal revenue code, deducted by the employer, and remitted as employer contributions to the general fund of the retirement system and must only be used to finance unfunded actuarial accrued liabilities of the retirement system.
(5) To the extent and upon approval by the Internal Revenue Service, the retirement system for the Tier 1 plan and the plan administrator for the Tier 2 plan may also determine the extent to which some or all of the individuals performing services for an entity not participating in the retirement system that receives any funding from the state school aid fund established in section 11 of article IX of the state constitution of 1963 may participate in the Tier 1 and Tier 2 plans.
Sec. 69h. (1) A member who has completed 10 years of service may elect to purchase not more than 5 years of service credit less the number of years of service credit purchased under sections 6(2)(c), (d), (e), or (f), 64(3), (4), or (5), and 69c(2), or former sections 69a, 69b, 69d, 69e, 74a, 74b, 77, or 78, on request and payment to the retirement system of the full actuarial cost. In calculating full actuarial cost under section 79, the retirement board and the department shall use normal cost and unfunded actuarial accrued liability determined under section 41b(2) as of the fiscal year ending immediately before the date of purchase.
(2) Service earned while a public school employee was a qualified participant only under Tier 2 must count when determining if a member has completed 10 years of service.
(3) Any payment made in a manner other than a lump sum must include additional interest at the same rate used to determine actuarial cost in subsection (1).
(4) Service credit purchased under this section must not be used to satisfy the service credit requirement set forth in section 81(1)(a) for a retirement allowance paid before age 56 as provided by section 43b(a).
(5) If a member who made payment for service under this section dies and a retirement allowance is not payable, or if the member withdraws from service and a retirement allowance is not payable, the payment made by the member must be refunded to the member or to the member's refund beneficiary on request.
Sec. 81c. (1) A member who first becomes a member on or after July 1, 2010 who no longer is working as a public school employee or in any other capacity for which service credit performed in this state is allowed under this act, on the member's written application to the retirement system, is entitled to a retirement allowance provided for in section 84(1) if the member is 60 years of age or older and has accumulated 10 or more years of credited service pursuant to section 68 as a public school employee and has reached regular retirement age.
(2) The eligibility requirements of subsection (1) must not be modified as provided in section 43b.
(3) The reduction provided for in section 84(2) does not apply to an individual who retires under this section.
(4) Notwithstanding any other provision of this act, a member who first becomes a member on or after July 1, 2010 shall not purchase or transfer service credit under article 4 and shall not have any purchased or transferred service credit included in the calculation of a retirement allowance on retirement.
(5) Beginning October 1, 2019 and for each fiscal year in which an experience investigation study is completed under section 41(16), if the most recent experience investigation study of mortality of the retirement system using a 65-year-old based on a 50-50 male-female blend shows an increase of 1 or more years from the previous experience investigation study of mortality, the retirement board, in consultation with the actuary and the department, shall increase the regular retirement age by at least 1 year up to the total increase in whole-year increments unless the most recent actuarial funded ratio for the benefits funded under section 41b(3) is greater than 100% after accounting for an increase in mortality as reflected in the experience investigation study. Any adjustment to the regular retirement age by the retirement board must take place within 12 months after the retirement board's adoption of the most recent experience investigation study on an effective date as determined by the retirement board. Any required increase to the regular retirement age under this subsection must take into account the cumulative increase in mortality relative to the experience investigation study covering the period 2012 through 2017, less any actual increase already taken into account in a previous increase to the regular retirement age. An adjustment to the regular retirement age under this subsection does not apply to a member who , on first became a member before the effective date of the increase. , is within 5 years of the then current regular retirement age. The retirement board may additionally exclude members who, on the effective date of the increase, are within between 5 and 8 years of the then current regular retirement age.
(6) As used in this section, "regular retirement age" means the following:
(a) For a member who first becomes a member on or after July 1, 2010 and before February 1, 2018, before the effective date of the first increase under subsection (5), 60 years of age and is not subject to increase as provided under subsection (5).
(b) Subject to subsection (5), for For a member who first becomes a member on or after February 1, 2018, 60 years of age.the effective date of an increase under subsection (5), the regular retirement age as it existed immediately before the date that the member first became a member.
Sec. 81d. (1) Except as provided in subsection (8), (9), the retirement system shall permit each qualified participant who first becomes a qualified participant and first works for a reporting unit after September 3, 2012 to make an election to not become a member of Tier 1 and become only a qualified participant in Tier 2.
(3) A qualified participant who first becomes a qualified participant and first works for a reporting unit after September 3, 2012 and before February 1, 2018 who does not make an election under subsection (1) for any reason on or before the close of the election period is considered to have made an election to become a member of Tier 1 and is subject to all of the following as of the date of his or her employment:
(a) The qualified participant is eligible to accrue any service credit or qualify for any retirement allowance under Tier 1 under the terms as provided in section 81c.
(b) The qualified participant is also a qualified participant under Tier 2.
(4) A qualified participant who first becomes a qualified participant and first works for a reporting unit after January 31, 2018 and before July 1, 2024 who does not make an election for any reason on or before the close of the election period is considered to have made an election to become only a qualified participant in Tier 2.
(5) An individual who makes the election under subsection (1) on or before the close of the election period or is a qualified participant described in subsection (4) is considered to have made an election to not become a member of Tier 1 and is subject to all of the following as of the date of his or her employment:
(a) The individual is not eligible to accrue any service credit or qualify for any retirement allowance under Tier 1 under the terms as provided in section 81c.
(b) The individual is only a qualified participant under Tier 2.
(6) A qualified participant who first becomes a qualified participant and first works for a reporting unit after June 30, 2024 who does not make an election under subsection (1) for any reason on or before the close of the election period is considered to have made an election to become a member of Tier 1 and is subject to all of the following as of the date of the qualified participant's employment:
(a) The qualified participant is eligible to accrue any service credit or qualify for any retirement allowance under Tier 1 under the terms as provided in section 81c.
(b) The qualified participant is also a qualified participant under Tier 2.
(7) The retirement system shall collect from an individual described in subsection (1) all amounts required under sections 43a and 131(2) and shall collect all required employer contributions required under Tier 1 from the individual's date of employment. If an individual makes a valid election under subsection (1) to not become a member of Tier 1 or is a qualified participant under subsection (4), the retirement system shall determine and implement a method to reconcile employer and employee contributions to be deposited to Tier 2, and any such employee contributions will be considered to be elective contributions under section 131.
(8) The retirement system shall provide to a qualified participant who before July 1, 2025 either elected, or under subsection (4) was considered to have made an election, to become only a qualified participant in Tier 2. A qualified participant who affirmatively makes a timely election in accordance with the process established by the retirement system is subject to all of the following as of the date of the qualified participant's changeover to Tier 1:
(a) Commencing as of the changeover date, the qualified participant is eligible to accrue service credit or qualify for any retirement allowance under Tier 1 under the terms as provided in section 81c.
(b) Only service credited and compensation earned after the changeover date shall be used to determine the qualified participant's retirement allowance under section 84.
(c) Notwithstanding sections 42(2) and 41b(4), a qualified participant shall contribute the qualified participant's contribution amount under section 41b(3) on a post-tax basis until such time as the department receives notification from the United States Internal Revenue Service that contributions under this subsection may be picked up by a reporting unit and will not be included as gross income of the member until they are distributed or made available to the member, retirant, retirement allowance beneficiary, or refund beneficiary.
(d) The qualified participant is also a qualified participant under Tier 2.
(e) The 1-time election period ends not later than August 1, 2025 and the changeover date is August 30, 2025.
(9) (8) A qualified participant who first becomes a qualified participant and first works for a reporting unit following the effective date of the qualifying event is only a Tier 2 qualified participant and is considered to have made an election to become only a qualified participant in Tier 2. This subsection does not apply after the effective date of the amendatory act that added this sentence. As used in this subsection:
(a) "Effective date of the qualifying event" means 12 months after the date that the retirement board receives the valuation report showing that the qualifying event has occurred.
(b) "Qualifying event" means the date on which the actuarial funded ratio for the plan for which the separate contribution rate is calculated under section 41b(2) falls below 85% for 2 consecutive years, based on the actuarial funded ratio using 5-year smoothing of investment returns. For purposes of valuation under this subdivision, the qualifying event does not occur if either of the following applies:
(i) The actuarial funded ratio falls below 85% but would not have fallen below 85% but for the failure of the employer or this state to make a required contribution as calculated under section 41b.
(ii) This state makes an appropriation to the plan described under this subdivision that increases the valuation as described under this subsection to 85% or higher.
Sec. 84. (1) Subject to section sections 84b and 81d(8)(b), and except as provided in subsection (2), upon on the member's retirement from service as provided in section 81, a member shall must receive a retirement allowance that equals the product of the member's total years, and fraction of a year, of credited service multiplied by 1.5% of the member's final average compensation. A member shall is not be allowed to use more than 15 years of out of system public education service, or more out of system public education service than service performed under this act or former 1945 PA 136 unless, before July 1, 1974, the member applied for out of system public education service credit based upon on payment of contributions for the service as required under section 69, or former acts, in which case the total out of system public education service credited, not to exceed 15 years, shall must be used to compute the member's retirement allowance if the minimum service requirements performed under this act or former acts or as a state employee under the state employees' retirement act, 1943 PA 240, MCL 38.1 to 38.69, are met. Credit for state of Michigan service shall must be on the same basis for eligibility for retirement provided in this act as if the service were performed under this act, former 1945 PA 136, former 1941 PA 56, or former 1937 PA 184.
(2) If a member having less than 30 years credited service retires before the member's sixtieth birthday as provided in section 81, the member's retirement allowance provided in subsection (1) shall must be reduced 1/2 of 1% for each month, and fraction of a month, within the period from the effective date of the member's retirement to the date of the member's sixtieth birthday, and shall must continue at that same percentage after becoming 60 years of age.
(3) The reduction of 1/2 of 1% for each month and fraction of a month from the member's retirement allowance effective date to the date of the member's sixtieth birthday provided for in former 1945 PA 136, applicable to a member who retired before July 1, 1974 and before attainment of age 60, shall does not apply to a member who retired before that date, at age 55 or more, having 30 or more years of credited service. The retirement allowance shall must be recalculated disregarding the reduction and the person receiving the retirement allowance shall be is eligible to receive an adjusted retirement allowance based on the recalculation beginning January 1, 1986, but shall is not be eligible to receive the adjusted amount attributable to any month beginning before January 1, 1986.
(4) The reduction provided for in subsection (2) shall does not apply to a member who retires under either section 86 or 87, or to a retirement allowance beneficiary who is granted an allowance under section 43c(c), 89, or 90.
(5) The retirement allowance of a person who satisfies the requirements of this subsection shall must be recalculated based on 1.5% of final average compensation times years of credited service. The person receiving the retirement allowance shall be is eligible to receive an adjusted retirement allowance based on the recalculation beginning January 1, 1986, but shall is not be eligible to receive the adjusted amount attributable to any month beginning before January 1, 1986. A retirement allowance shall must be recalculated under this subsection if 1 of the following applies:
(a) The retirement allowance was payable to a retirant or retirement allowance beneficiary under chapter II of former 1945 PA 136 and the retirement allowance effective date was on or after July 1, 1956 but before July 1, 1974.
(b) The retirement allowance was payable to a plan II retirant or retirement allowance beneficiary under chapter I of former 1945 PA 136 and the retirement allowance effective date was before July 1, 1974.
(6) A member retiring pursuant to under section 81 who acquires at least 5 years of combined credited service under this act or under former 1945 PA 136, and who is already in receipt of a retirement allowance under chapter II of former 1945 PA 136, may elect to return to the retirement system any retirement allowance payments received, and receive a single retirement allowance computed on the combined years of service credited under this act and any former act.
