SB-1226, As Passed Senate, April 14, 2010

SUBSTITUTE FOR

SENATE BILL NO. 1226

A bill to amend 1943 PA 240, entitled

"State employees' retirement act,"

by amending sections 20d and 68 (MCL 38.20d and 38.68), section 20d

as amended by 2002 PA 93 and section 68 as added by 1996 PA 487,

and by adding sections 35 and 68d.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 20d. (1) On and after July 1, 1974, hospitalization and

medical coverage insurance premium payable by any retirant or his

or her beneficiary and his or her dependents under any group health

plan authorized by the Michigan civil service commission and the

department of technology, management, and budget shall be paid by

the retirement board from the health insurance reserve fund created

in section 11. The amount payable shall be in the same proportion

of premium payable by the state of Michigan for the classified

employees occupying positions in the state civil service who

commenced employment with the state before April 1, 2010. The

hospitalization and medical insurance premium payable shall be paid

from appropriations made for this purpose to the health insurance

reserve fund sufficient to cover the premium payment needed to be

made.

(2) Effective January 1, 1988, 90% of the premium payable by a

retirant or the retirant's beneficiary and his or her dependents

for dental coverage or vision coverage, or both, under any group

plan authorized by the Michigan civil service commission and the

department of management and budget shall be paid by the retirement

board from the health insurance reserve fund created in section 11.

(3) The department of technology, management, and budget shall

calculate for each fiscal year any cost savings that have accrued

to this state as a result of the implementation of 1996 PA 487 over

the costs that would have been incurred by this state to fund

premiums payable pursuant to section 68 had 1996 PA 487 not been

implemented. The total amount of the cost savings, if any, shall be

allocated to the health advance funding subaccount created under

section 11(9).

(4) On and after March 31, 1997, the retirement system shall

also pay health insurance premiums described in this section in the

manner prescribed in section 68.

(5) For purposes of this section, "retirant" includes a person

who retires under section 306 or 410 of the Michigan military act,

1967 PA 150, MCL 32.706 and 32.810.

Sec. 35. (1) Beginning October 1, 2010, each Tier 1 member

shall contribute an amount equal to 3% of his or her compensation

to the employees' savings fund.

(2) The retirement system shall determine a method of

deducting the contributions provided for in this section from the

compensation of each member for each payroll and each payroll

period.

(3) This state shall pick up the member contributions required

by subsection (1) for all compensation earned after October 1,

2010. Contributions picked up shall be treated as employer

contributions in determining tax treatment under the internal

revenue code. This state shall pay these member contributions from

the same source of funds that is used in paying compensation to the

member. This state may pick up these contributions by a reduction

in the cash salary of the member.

(4) Any additional member contributions as a result of the

amendatory act that added this section shall be used to fund

benefits for service credit earned beginning on and after October

1, 2010 and shall not be used to fund any unfunded liability for

any accrued financial benefits that have been earned by members

before October 1, 2010. Notwithstanding any other provision of this

act, a member shall accrue service credit for each year of service

for which payment of the additional member contributions have been

paid, but shall forfeit any service credit if payments are not

initially made or if payments are subsequently refunded to the

member.

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 person 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. 68d. (1) There is appropriated for the fiscal year ending

September 30, 2010, $500,000.00 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.

$500,000.00.

(d) The estimated completion date for the work project is

September 30, 2011.