Bill Text: MI SB0792 | 2019-2020 | 100th Legislature | Introduced
Bill Title: Retirement; judges; contributions to tax-deferred accounts instead of retiree health benefits for certain employees; provide for, and establish auto enrollment feature for defined contribution plan. Amends secs. 301 & 604 of 1992 PA 234 (MCL 38.2301 & 38.2604) & adds secs. 509a & 714a.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2020-02-13 - Referred To Committee On Appropriations [SB0792 Detail]
Download: Michigan-2019-SB0792-Introduced.html
SENATE BILL NO. 792
February 13, 2020, Introduced by Senator
BARRETT and referred to the Committee on Appropriations.
A bill to amend 1992 PA 234, entitled
"The judges retirement act of 1992,"
by amending sections 301 and 604 (MCL 38.2301 and 38.2604), section 604 as amended by 2018 PA 335, and by adding sections 509a and 714a.
the people of the state of michigan enact:
Sec. 301. (1) The retirement system shall direct the actuary to do all of the following:
(a) Determine the annual level percent of payroll contribution rate to finance the benefits provided under this act by actuarial valuation pursuant to under subsections (2) and (3), and upon on the basis of the risk assumptions that the retirement board and the department adopt after consultation with the state treasurer and the actuary.
(b) Make an annual actuarial valuation of the retirement system in order to determine the actuarial condition of the retirement system and the required contribution to the retirement system.
(c) Make an annual actuarial gain-loss experience study of the retirement system in order to determine the financial effect of variations of actual retirement system experience from projected experience.
(2) The actuary shall compute the contribution rate for monthly benefits payable in the event of death of a member before retirement or the disability of a member using a terminal funding an individual projected benefit entry age normal cost method of actuarial valuation.
(3) The actuary shall compute the contribution rate for benefits other than those described in subsection (2) using an individual projected benefit entry age normal actuarial cost method. The contribution rate for service that may be rendered in the current year, known as the normal cost contribution rate, is equal to the aggregate amount of individual entry age normal costs divided by l% of the aggregate amount of active members' valuation compensation. The contribution rate for unfunded service rendered on or before the last day of the fiscal year, known as the unfunded actuarial accrued liability contribution rate, is equal to the aggregate amount of unfunded actuarial accrued liabilities divided by l% of the actuarial present value over a period not to exceed 40 years of projected benefit compensation, where unfunded actuarial accrued liabilities are equal to the actuarial present value of benefits reduced by the actuarial present value of future normal costs and the actuarial value of assets on the last day of the fiscal year.Beginning with the September 30, 2019 valuation, the contribution rate for health benefits provided under sections 509 and 719 must be computed using an individual projected benefit entry age normal cost method of valuation. The unfunded actuarial accrued liability must be equal to the actuarial present value of benefits reduced by the actuarial present value of future normal cost contributions and the actuarial value of assets on the valuation date. Except as otherwise provided in this subsection, the unfunded actuarial accrued liability must be amortized in accordance with generally accepted governmental accounting standards over a period equal to or less than 25 years, with the payment schedule for the employer being based on and applied to the combined payrolls of the employees who are Plan 1 members and Plan 2 members.
Sec. 509a. (1) For a member or qualified participant who is not a Plan 1 member or Plan 2 member and is not eligible for any future health insurance coverage premium from the retirement system, a member's or qualified participant's employer shall make a matching contribution up to 2% of the member's or qualified participant's compensation to Tier 2. A matching contribution under this subsection may not be used as the basis for a loan from that member or qualified participant's Tier 2 account.
(2) A member or qualified participant as described in subsection (1) may make a contribution up to 2% of the member's or qualified participant's compensation to a Tier 2 account. A member or qualified participant who makes a contribution under this subsection may make additional contributions to his or her Tier 2 account as permitted by the department and the internal revenue code.
(3) A member or qualified participant is vested in contributions made to his or her Tier 2 account under subsections (1) and (2) according to the vesting provisions under section 715.
(4) The contributions described in this section must begin with the first payroll date after the member or qualified participant is employed or after October 1, 2020, whichever is later, and end on his or her termination of employment.
(5) As used in this section, "employer" means that term as defined in section 705.
Sec. 604. (1) This section is enacted under section 401(a) of the internal revenue code, 26 USC 401, which imposes certain administrative requirements and benefit limitations for qualified governmental plans. This state intends that the retirement system be a qualified pension plan created in trust under section 401 of the internal revenue code, 26 USC 401, and that the trust be an organization exempt from taxation under section 501 of the internal revenue code, 26 USC 501. The department shall administer the retirement system to fulfill the intent of this subsection.
(2) The retirement system shall must be administered in compliance with the provisions of section 415 of the internal revenue code, 26 USC 415, and regulations under that section that are applicable to governmental plans and, beginning January 1, 2010, applicable provisions of the final regulations issued by the Internal Revenue Service on April 5, 2007. Employer-financed benefits provided by the retirement system under this act must not exceed the applicable limitations set forth in section 415 of the internal revenue code, 26 USC 415, as adjusted by the commissioner of internal revenue under section 415(d) of the internal revenue code, 26 USC 415, to reflect cost-of-living increases, and the retirement system shall adjust the benefits, including benefits payable to retirants and retirement allowance beneficiaries, subject to the limitation each calendar year to conform with the adjusted limitation. For purposes of section 415(b) of the internal revenue code, 26 USC 415, the applicable limitation applies to aggregated benefits received from all qualified pension plans for which the office of retirement services coordinates administration of that limitation. If there is a conflict between this section and another section of this act, this section prevails.
(3) The assets of the retirement system must be held in trust and invested for the sole purpose of meeting the legitimate obligations of the retirement system and must not be used for any other purpose. The assets must not be used for or diverted to a purpose other than for the exclusive benefit of the members, vested former members, retirants, and retirement allowance beneficiaries before satisfaction of all retirement system liabilities.
(4) The retirement system shall return post-tax member contributions made by a member and received by the retirement system to a member on retirement, under Internal Revenue Service regulations and approved Internal Revenue Service exclusion ratio tables.
(5) The required beginning date for retirement allowances and other distributions must not be later than April 1 of the calendar year following the calendar year in which the employee attains age 70-1/2 or April 1 of the calendar year following the calendar year in which the employee retires. The required minimum distribution requirements imposed by section 401(a)(9) of the internal revenue code, 26 USC 401, apply to this act and must be administered in accordance with a reasonable and good faith interpretation of the required minimum distribution requirements for all years in which the required minimum distribution requirements apply to this act.
(6) If the retirement system is terminated, the interest of the members, vested former members, retirants, and retirement allowance beneficiaries in the retirement system is nonforfeitable to the extent funded as described in section 411(d)(3) of the internal revenue code, 26 USC 411, and related Internal Revenue Service regulations applicable to governmental plans.
(7) Notwithstanding any other provision of this act to the contrary that would limit a distributee's election under this act, a distributee may elect, at the time and in the manner prescribed by the retirement board, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. This subsection applies to distributions made after December 31, 1992. Beginning October 1, 2010, a nonspouse beneficiary may elect to have any portion of an amount payable under this act that is an eligible rollover distribution treated as a direct rollover that will be paid in a direct trustee-to-trustee transfer to an individual retirement account or individual retirement annuity described in section 408(a) or (b) of the internal revenue code, 26 USC 408, that is established for the purpose of receiving a distribution on behalf of the beneficiary and that will be treated as an inherited individual retirement account or individual retirement annuity pursuant to section 402(c)(11) of the internal revenue code, 26 USC 402.
(8) For purposes of determining actuarial equivalent retirement allowances under sections 506(1)(a) and (b) and 602, the actuarially assumed interest rate must be determined by the director of the department and the retirement board in consultation with the actuary using the mortality tables adopted by the department and the retirement board.
(9) Notwithstanding any other provision of this act, the compensation of a member of the retirement system must be taken into account for any year under the retirement system only to the extent that it does not exceed the compensation limit established in section 401(a)(17) of the internal revenue code, 26 USC 401, as adjusted by the commissioner of internal revenue. This subsection applies to an individual who first becomes a member of the retirement system after September 30, 1996.
(10) Notwithstanding any other provision of this act, contributions, benefits, and service credit with respect to qualified military service will be provided under the retirement system in accordance with section 414(u) of the internal revenue code, 26 USC 414. This subsection applies to all qualified military service after December 11, 1994. Beginning on January 1, 2007, in accordance with section 401(a)(37) of the internal revenue code, 26 USC 401, if a member dies while performing qualified military service, for purposes of determining any death benefits payable under this act, the member is treated as having resumed and then terminated employment on account of death.
Sec. 714a. Tier 2 and tax-deferred accounts are subject to the following terms and conditions:
(a) Before April 2, 2020, the retirement system shall design an automatic enrollment feature that provides that unless a qualified participant who makes contributions under section 714(3) or who makes a contribution under section 509a(2) elects to contribute a lesser amount, the qualified participant shall contribute the amount required to qualify for all eligible matching contributions under this act. The retirement system shall implement this automatic enrollment feature as soon as administratively feasible, but no later than 12 months after the enactment of the amendatory act that added this section.
(b) In addition to elective employee contributions to Tier 2 or a tax-deferred account, this state may use elective employee contributions to the state 457 deferred compensation plan as a basis for making employer matching contributions to Tier 2 or a tax-deferred account.
(c) Employer matching contributions do not have to be made to the same plan or account to which the elective employee contributions were contributed as the basis for the matching contributions.
(d) Elective employee contributions may not be used as the basis for more than an equivalent amount of employer matching contributions.
(e) The retirement system shall design and implement a method to determine the proper allocation of employer matching contributions based on elective employee contributions as provided in this section.
