SB-1226, As Passed House, September 23, 2010
HOUSE SUBSTITUTE FOR
SENATE BILL NO. 1226
A bill to amend 1943 PA 240, entitled
"State employees' retirement act,"
by amending sections 38, 68, and 68c (MCL 38.38, 38.68, and
38.68c), section 38 as amended by 2007 PA 16, section 68 as added
by 1996 PA 487, and section 68c as amended by 2010 PA 54, and by
adding sections 19j, 20i, 35, and 68d.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 19j. (1) Notwithstanding section 19, a member may retire
and receive a retirement allowance computed under this section if
the member meets all of the following requirements:
(a) On the last day of the month preceding the effective date
of his or her retirement as stated in subdivision (f), the member's
combined age and length of credited service is equal to or greater
than 80 years, the member's length of credited service is equal to
or greater than 30 years, or the member is eligible to retire under
section 19 with a retirement allowance that is not subject to
reduction under section 19(2).
(b) The member occupies a position in the classified state
civil service, has classified state civil service status, or is an
individual not described in subsection (2)(b).
(c) The member is not eligible for a supplemental early
retirement under section 46 as a covered employee defined in
section 45, or if the member is eligible for a supplemental early
retirement under section 46 as a covered employee defined in
section 45, the member meets the requirements of subsection (6).
(d) The member is not a conservation officer as described in
section 48, or if the member is a conservation officer as described
in section 48, the member meets the requirements of subsection (6).
(e) The member was employed by this state or the legislature
within the 6-month period ending on the first day of the
incentivized retirement application period. A member who was laid
off or granted an approved leave of absence from state employment
within the 12-month period ending on the first day of the
incentivized retirement application period is considered to have
met the employment requirement of this subdivision.
(f) The member executes and files an application in a manner
determined by the retirement system with the retirement board,
during the incentivized retirement application period, stating a
retirement allowance effective date that is on or after November 1,
2010 but not later than January 1, 2011. A member may withdraw an
application on or before the close of the incentivized retirement
application period. An application submitted by a member and not
withdrawn on or before the close of the incentivized retirement
application period is irrevocable.
(2) Notwithstanding section 19, a member may retire and
receive a retirement allowance computed under this section if the
member meets all of the following requirements:
(a) On the last day of the month preceding the effective date
of his or her retirement as stated in subdivision (f), the member's
combined age and length of credited service is equal to or greater
than 80 years, the member's credited service is equal to or greater
than 30 years, or the member is eligible to retire under section 19
with a retirement allowance that is not subject to reduction under
section 19(2).
(b) The member is an employee of the legislative branch of
state government without classified civil service status, is an
employee of the judicial branch of state government, or is an
unclassified state employee not within the classified state civil
service.
(c) The member is not eligible for a supplemental early
retirement under section 46 as a covered employee defined in
section 45, or if the member is eligible for a supplemental early
retirement under section 46 as a covered employee defined in
section 45, the member meets the requirements of subsection (6).
(d) The member is not a conservation officer as described in
section 48, or if the member is a conservation officer as described
in section 48, the member meets the requirements of subsection (6).
(e) The member was employed by this state within the 6-month
period ending on the first day of the incentivized retirement
application period. A member who was laid off or granted an
approved leave of absence from state employment within the 12-month
period ending on the first day of the incentivized retirement
application period is considered to have met the employment
requirement of this subdivision.
(f) The member executes and files an application in a manner
determined by the retirement system with the retirement board,
during the incentivized retirement application period, stating a
retirement allowance effective date that is on or after November 1,
2010 but not later than January 1, 2011. A member may withdraw an
application on or before the close of the incentivized retirement
application period. An application submitted by a member and not
withdrawn on or before the close of the incentivized retirement
application period is irrevocable.
(3) Notwithstanding any other provision of this act, a member
retiring under this section agrees that any amount that he or she
would otherwise be entitled to receive at retirement on account of
accumulated annual leave, sick leave, and other deferred leave
hours shall not be paid to the member and shall be forfeited. The
value of accrued annual leave up to 240 hours and the value of
voluntary and involuntary pay reduction plan B for services
rendered on or before October 1, 1981, forfeited under this
subsection by a member shall be included in the calculation for the
purposes of determining "final average compensation" for that
member under this section. This subsection does not apply to banked
leave time.
(4) The director of a principal department of the executive
branch of state government may request that the effective date of
retirement under subsection (1) or (2) of a member employed by that
department be extended to a date not later than July 1, 2011. To
make a request under this subsection, the director shall submit a
written request and the written concurrence of the member to the
director of the office of the state employer and the state budget
director on or before the close of the incentivized retirement
application period. Upon receipt of the written request and
concurrence, the director of the office of the state employer and
the state budget director may extend the effective date of
retirement of a member otherwise eligible to retire under
subsection (1) or (2) to a date not later than July 1, 2011. Upon
written approval of the senate majority leader for a member who is
an employee of the senate, the speaker of the house of
representatives for a member who is an employee of the house of
representatives, the senate majority leader and the speaker of the
house of representatives for a member who is an employee of the
office of the auditor general, director or chair of the legislative
retirement system for a member who is an employee of the
legislative retirement system, or the chair and alternate chair of
the legislative council for a member who is an employee of an
agency under the jurisdiction of the legislative council, and upon
written concurrence of the member, the effective date of retirement
for that member may be extended to a date not later than July 1,
2011. Upon written approval of the chief justice for a member who
is an employee of the judicial branch, including, but not limited
to, members described in section 44a, and upon written concurrence
of the member, the effective date of retirement for that member may
be extended to a date not later than July 1, 2011. The individual
or individuals who approve the extension of an effective date of
retirement for a member who is an employee of the legislature,
supreme court, or court of appeals shall submit written
notification to the office of retirement services of all extensions
approved on or before October 29, 2010.
(5) Upon his or her retirement as provided in this section, a
member with a retirement allowance effective date on or before
January 1, 2011 shall receive a retirement allowance equal to the
member's number of years and fraction of a year of credited service
multiplied by 1.6% of his or her final average compensation if the
member's final average compensation is $90,000.00 or less, and the
member is eligible to retire under section 19 with a retirement
allowance that is not subject to reduction under section 19(2). If
the member has a retirement allowance effective date on or before
January 1, 2011, the member is eligible to retire under section 19
with a retirement allowance that is not subject to reduction under
section 19(2), and that member has a final average compensation
that is greater than $90,000.00, the retirement allowance shall be
equal to the member's number of years and fraction of a year of
credited service multiplied by 1.6% of his or her final average
compensation up to a final average compensation of $90,000.00 and
the remaining portion of the retirement allowance shall be equal to
the member's number of years and fraction of a year of credited
service multiplied by 1.5% of the portion of final average
compensation over $90,000.00. For members eligible under this
section because the member's combined age and length of credited
service is equal to or greater than 80 years or because the
member's length of credited service is equal to or greater than 30
years, upon his or her retirement as provided in this section, a
member who retires with a retirement effective date on or before
January 1, 2011 shall receive a retirement allowance equal to the
member's number of years and fraction of a year of credited service
multiplied by 1.55% of the member's final average compensation if
the final average compensation is $90,000.00 or less. For members
eligible to retire under this section because the member's combined
age and length of credited service is equal to or greater than 80
years or because the member's length of credited service is equal
to or greater than 30 years whose final average compensation is
greater than $90,000.00, the retirement allowance shall be
calculated so that the member receives a portion of his or her
retirement allowance equal to the member's number of years and
fraction of a year of credited service multiplied by 1.55% of his
or her final average compensation up to a final average
compensation of $90,000.00 and the remaining portion of the
retirement allowance shall be calculated as equal to the member's
number of years and fraction of a year of credited service
multiplied by 1.5% of the portion of final average compensation
over $90,000.00. No additional increase in multiplier shall be used
based on an extension under subsection (4).
(6) A member who is a conservation officer as described in
section 48 or a member who is eligible for a supplemental early
retirement under section 46 as a covered employee defined in
section 45 may make the election and be eligible for a retirement
allowance under this section if the member meets the eligibility
requirements of this section. A member who meets the eligibility
requirements and makes an election under this section shall receive
a retirement allowance calculated under this section and shall not
be eligible for any supplemental benefit that he or she may have
been eligible for had he or she retired under sections 45 to 48.
(7) Any additional costs to the retirement system as a result
of the retirement allowance calculations under this section shall
be amortized over a 5-year period.
(8) As used in this section, "incentivized retirement
application period" means the period beginning on the effective
date of the amendatory act that added this section and ending on
November 5, 2010 at 5 p.m. eastern standard time unless the member
selects a retirement allowance effective date of November 1, 2010.
If the member selects a retirement allowance effective date of
November 1, 2010, then the incentivized retirement application
period ends on October 22, 2010 at 5 p.m. eastern daylight time.
Sec. 20i. Upon his or her retirement as provided for in
section 19j, beginning January 1, 2011, a member shall receive a
supplement for 60 months to his or her retirement allowance
payments equal to 1/60 of the amount forfeited in section 19j(3).
The total amount of the supplement shall also be treated in the
same manner as accumulated contributions credited to the retirant
in the employees saving fund for purposes of a calculation
Senate Bill No. 1226 (H-38) as amended September 23, 2010
performed for this supplement in the same manner as section 20(3).
The amounts in this section do not include banked leave time. The
employer shall make payments to the retirement system in amounts
equal to the supplement required under this section. These payments
shall be made from funds appropriated to the appointing authority
in a manner determined by the employer.
Sec. 35. (1) Except as otherwise provided in this section,
beginning with the first pay date after November 1, 2010 and ending
September 30, 2013, each member and each qualified participant
shall contribute an amount equal to 3.0% of the member's or
qualified participant's compensation to the appropriate funding
account established under the public employee retirement health
care funding act, 2010 PA 77, MCL 38.2731 to 38.2747. The member
and qualified participant contributions shall be deducted by the
employer and remitted as employer contributions to the funding
account in a manner that the state budget office and the retirement
system shall determine. The state budget office and the retirement
system shall determine a method of deducting the contributions
provided for in this section from the compensation of each member
and qualified participant for each payroll and each payroll period.
(2) As used in this act, "funding account" means the
appropriate irrevocable trust created in the public employee
retirement health care funding act, 2010 PA 77, MCL 38.2731 to
38.2747, for the deposit of funds and the payment of retirement
health care benefits.
[(3) The department of technology, management, and budget shall ensure, to the maximum extent possible, that payments made under this section shall be applied for any tax credits or tax liability reduction under the health care and education reconciliation act of 2010, Public Law 111-152.]
Sec. 38. (1) The annual level percent of payroll contribution
rate to finance the benefits provided under this act shall be
determined by actuarial valuation pursuant to subsections (2) and
(3), upon the basis of the risk assumptions adopted by the
retirement board with approval of the department of management and
budget, and in consultation with the investment counsel and the
actuary. An annual actuarial valuation shall be made of the
retirement system in order to determine the actuarial condition of
the retirement system and the required contribution to the
retirement system. The actuary shall report to the legislature by
April 15 of each year on the actuarial condition of the retirement
system as of the end of the previous fiscal year and on the
projections of state contributions for the next fiscal year. The
actuary shall certify in the report that the techniques and
methodologies used are generally accepted within the actuarial
profession and that the assumptions and cost estimates used fall
within the range of reasonable and prudent assumptions and cost
estimates. An annual actuarial gain-loss experience study of the
retirement system shall be made in order to determine the financial
effect of variations of actual retirement system experience from
projected experience.
(2) The contribution rate for monthly benefits payable in the
event of the death of a member before retirement or the disability
of
a member shall be computed using a terminal funding method of
actuarial
valuation an individual
projected benefit entry age
normal cost method of valuation.
(3) Except as otherwise provided in this subsection, the
contribution
rate for benefits other than those provided for in
subsection
(2) shall be computed using an
individual projected
benefit entry age normal cost method of valuation. For the 1995-96
state fiscal year and for each subsequent fiscal year in which the
actuarial accrued liability for health benefits is less than 100%
funded, the contribution rate for benefits provided under section
20d shall be computed using a cash disbursement method. Beginning
in the fiscal year after the fiscal year in which the actuarial
accrued liability for health benefits under section 20d is at least
100% funded by the health advance funding subaccount created under
section 11(9), and continuing for each subsequent fiscal year, the
contribution rate for health benefits provided under section 20d
shall be computed using an individual projected benefit entry age
normal cost method of valuation. The contribution rate for service
that may be rendered in the current year, the normal cost
contribution rate, shall be equal to the aggregate amount of
individual entry age normal costs divided by 1% of the aggregate
amount of active members' valuation compensation. The unfunded
actuarial accrued liability shall 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 shall be amortized in
accordance with generally accepted governmental accounting
standards over a period equal to or less than 40 years. For the
fiscal year that begins on October 1, 2006 only, the contribution
for the unfunded actuarial accrued liability shall be equal to 4.5%
of the unfunded actuarial accrued liability.
(4) The legislature annually shall appropriate to the
retirement system the amount determined pursuant to subsections (2)
and (3). The state treasurer shall transfer monthly to the
retirement system an amount equal to the product of the
contribution rates determined in subsections (2) and (3) times the
aggregate amount of active member compensation paid during that
month. Not later than 60 days after the termination of each state
fiscal year, the executive secretary of the retirement board shall
certify to the director of the department of management and budget
the actual aggregate compensations paid to active members during
the preceding state fiscal year. Upon receipt of that
certification, the director of the department of management and
budget shall compute the difference, if any, between actual state
contributions received during the preceding state fiscal year and
the product of the contribution rates determined in subsections (2)
and (3) times the aggregate compensations paid to active members
during the preceding state fiscal year. Except as otherwise
provided in subsection (5), the difference, if any, shall be
submitted in the executive budget to the legislature for
appropriation in the next succeeding state fiscal year. This
subsection does not apply for those fiscal years in which a deposit
occurs pursuant to subsection (6).
(5) For differences occurring in fiscal years beginning on or
after October 1, 1991, 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
(4), 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 shall 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. In addition, interest shall be included for each year
that a portion of the remaining difference is carried forward. The
interest rate shall equal the actuarially assumed rate of
investment return for the state fiscal year in which payment is
made. This subsection does not apply for those fiscal years in
which a deposit occurs pursuant to subsection (6).
(6) For each fiscal year that begins on or after October 1,
2001, if the actuarial valuation prepared pursuant to 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 annual level percent of payroll contribution rate as
determined pursuant to subsections (1), (2), and (3) may be
deposited into the health advance funding subaccount created under
section 11(9).
(7) 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, the benefits that are required to be paid from that fund shall
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 shall 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.
Sec. 68. (1) A former qualified participant may elect health
insurance benefits in the manner prescribed in this section if he
or she meets both of the following requirements:
(a) The former qualified participant is vested in health
benefits under section 64(2).
(b) The former qualified participant meets or exceeds the
benefit commencement age employed in the actuarial present value
calculation under section 51 and the service requirements that
would have applied to that former participant under Tier 1 for
receiving health insurance coverage under section 20d, if that
former participant was a member of Tier 1.
(2) A former qualified participant who is eligible to elect
health insurance coverage under subsection (1) may elect health
insurance coverage in a health benefit plan or plans as authorized
by
section 20d. , or in another plan as provided in subsection (6).
A former qualified participant who is eligible to elect health
insurance coverage under subsection (1) may also elect health
insurance coverage for his or her health benefit dependents, if
any. A surviving health benefit dependent of a deceased former
qualified participant who is eligible to elect health insurance
coverage under subsection (1) may elect health insurance coverage
in the manner prescribed in this section.
(3)
Except as otherwise provided in subsection (6), an An
individual who elects health insurance coverage under this section
shall become a member of a health insurance coverage group
authorized pursuant to section 20d.
(4) For a former qualified participant who is eligible to
elect health insurance coverage under subsection (1) and who is
vested in those benefits under section 64(2)(a), and for his or her
health benefit dependents, this state shall pay a portion of the
health insurance premium as calculated under this subsection on a
cash disbursement method. An individual described in this
subsection who elects health insurance coverage under this section
shall pay to the retirement system the remaining portion of the
health insurance coverage premium not paid by this state under this
subsection.
The For a former qualified
participant who commenced
state employment before April 1, 2010 and for his or her health
benefit dependents, the portion of the health insurance coverage
premium paid by this state under this subsection shall be equal to
the product of 3% and the former qualified participant's years of
service,
up to 30 years, and but shall not exceed the lesser of 90%
of the payments for health insurance coverage or the portion of the
health insurance coverage premiums payable by this state for a
retirant, his or her beneficiary, and his or her dependents under
section 20d. If the individual elects the health insurance coverage
provided under section 20d, the state shall transfer its portion of
the amount calculated under this subsection to the health insurance
reserve fund created by section 11. For a former qualified
participant who commenced state employment on or after April 1,
2010 and for his or her health benefit dependents, the portion of
the health insurance coverage premium paid by this state under this
subsection shall be equal to the product of 3% and the former
qualified participant's years of service, up to 30 years, but shall
not exceed the lesser of the portion of the health insurance
coverage premiums payable by this state for a retirant, his or her
beneficiary, and his or her dependents under section 20d or the
portion of the health insurance coverage premiums payable by this
state for a member who occupies a position in the classified state
civil service or has classified civil service status commencing
state employment on or after April 1, 2010.
(5) For a former qualified participant who is eligible to
elect health insurance coverage under subsection (1) and who is
vested in those benefits under section 64(2)(b), and for his or her
health benefit dependents, this state shall pay a portion of the
health insurance premium as calculated under this subsection on a
cash disbursement method. An individual described in this
subsection who elects health insurance coverage under this section
shall pay to the retirement system the remaining portion of the
health insurance coverage premium not paid by this state under this
subsection. The portion of the health insurance coverage premium
paid by this state under this subsection shall be equal to the
premium amounts paid on behalf of retirants of Tier 1 for health
insurance coverage under section 20d. If the individual elects the
health insurance coverage provided under section 20d, the state
shall transfer its portion of the amount calculated under this
subsection to the health insurance reserve fund created by section
11.
(6)
A former qualified participant or health benefit dependent
who
is eligible to elect health insurance coverage under this
section
and who elects health insurance coverage under a different
plan
than the plan authorized under section 20d may elect to have
an
amount up to the amount of the retirement system's share of the
monthly
health insurance premium subsidy provided in this section
paid
by the retirement system directly to the other health
insurance
plan or to a medical savings account established pursuant
to
section 220 of the internal revenue code, to the extent allowed
by
law or under the provisions and procedures of Tier 2. Beginning
January 1, 2011, any former qualified participant or health benefit
dependent who is eligible to elect health insurance coverage under
this section and who previously elected coverage under a different
plan than the plan authorized under section 20d may either elect
coverage under this section or may at his or her own cost
participate in coverage under a different plan than the plan
authorized under section 20d.
(7) If the department of technology, management, and budget
receives notification from the United States internal revenue
service that this section or any portion of this section will cause
the retirement system to be disqualified for tax purposes under the
internal revenue code, then the portion that will cause the
disqualification does not apply.
(8) As used in this section, "health insurance coverage" means
the hospitalization and medical insurance, dental coverage, vision
coverage, and any other health care insurance provided in section
20d.
Sec. 68c. (1) Except as otherwise provided in this section, a
retirant who is receiving a retirement allowance under this act and
is
employed by this state beginning on or after October 1, 2, 2007
agrees to forfeit his or her right to receive that retirement
allowance during this period of state employment. The retirement
system shall cease payment of the retirement allowance to a
retirant described in this subsection during this period of state
employment and shall reinstate payment of the retirement allowance
without recalculation when the period of state employment ceases.
This subsection does not apply to a retirant who is employed by
this
state on September 30, 2007 October
1, 2007 so long as he or
she
remains in the position held by the retirant on September 30,
2007
October 1, 2007. As used in this subsection, "employed by this
state" means employed directly by this state as an employee or
indirectly by this state through a contractual arrangement with
other parties. Beginning after October 1, 2010, "employed by this
state" shall also include engagement by the state as an independent
contractor. This subsection does not apply to a retirant who is
engaged as an independent contractor on October 1, 2010 so long as
the retirant remains engaged in the same contract that was held by
the retirant on October 1, 2010 without amendment or extension.
(2) A hospital, medical-surgical, and sick care benefits plan,
dental plan, vision plan, and hearing plan that covers retirants,
retirant allowance beneficiaries, former qualified participants,
and health benefit dependents under this act shall contain a
coordination of benefits provision that provides all of the
following:
(a) If the person covered under any of the plans is also
eligible for medicare, then the benefits under medicare shall be
determined before the health insurance benefits under this act.
(b) If a person covered under any of the plans provided by
this act is also covered under another plan that contains a
coordination of benefits provision, the benefits shall be
coordinated as provided in the coordination of benefits act, 1984
PA 64, MCL 550.251 to 550.255.
(c) If the person covered under any of the plans provided by
this act is also covered under another plan that does not contain a
coordination of benefits provision, the benefits under the other
plan shall be determined before the benefits provided pursuant to
this act.
(3) Subsection (1) does not apply to a retirant if all of the
following apply:
(a) The retirant is hired to provide health care services to
individuals under the jurisdiction of the department of
corrections.
(b) The retirant is hired in a position that is limited in
term, no benefits are paid, and pay is on a per diem basis.
(c) The department of corrections provides written notice to
the state budget office and the department of technology,
management, and budget that attempts have been made to fill the
position through postings and recruitment and that the position
vacancy still exists.
(d) The department of corrections reports the employment of a
retirant under this subsection within 30 days of employment of the
retirant to the state budget office and the department of
technology, management, and budget. The report shall include the
name of the retirant, the capacity in which the retirant is
employed, and the total compensation paid to the retirant.
(4) Subsection (1) does not apply to the appointment of a
retirant who was an assistant attorney general as a special
assistant attorney general when the attorney general determines
that, as a result of his or her previous employment with the state,
the retirant possesses specialized expertise and experience
necessary for the appointment and that the appointment is the most
cost-effective option for this state.
Sec. 68d. (1) There is appropriated for the fiscal year ending
September 30, 2010, $1,600,000.00 to the office of retirement
services in the department of technology, management, and budget
for administration of the changes under the amendatory act that
added this section.
(2) The appropriation authorized in subsection (1) is a work
project appropriation, and any unencumbered or unallotted funds are
carried forward into the following fiscal year. The following is in
compliance with section 451a(1) of the management and budget act,
1984 PA 431, MCL 18.1451a:
(a) The purpose of the project is to administer changes under
the amendatory act that added this section.
(b) The work project will be accomplished through a plan
utilizing interagency agreements, employees, and contracts.
(c) The total estimated completion cost of the work project is
$1,600,000.00.
(d) The estimated completion date for the work project is
September 30, 2011.
Enacting section 1. If any section or part of a section of
this act is for any reason held to be invalid or unconstitutional,
the holding does not affect the validity of the remaining sections
of this act or the act in its entirety.