November 27, 2012, Introduced by Rep. McMillin and referred to the Committee on Appropriations.
A bill to amend 1980 PA 300, entitled
"The public school employees retirement act of 1979,"
by amending sections 4 and 8 (MCL 38.1304 and 38.1308), section 4
as amended by 2010 PA 75 and section 8 as amended by 2012 PA 300,
and by adding sections 34a and 43f.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 4. (1) "Compound interest" means interest compounded
annually on July 1 on the contributions on account as of the
previous July 1 and computed at the rate of investment return
determined under section 104a(1) for the last completed state
fiscal year.
(2) "Contributory service" means credited service other than
noncontributory service.
(3) "Deferred member" means a member who has ceased to be a
public school employee and has satisfied the requirements of
section 82 for a deferred vested service retirement allowance.
(4) "Department" means the department of technology,
management, and budget.
(5) "Designated date" means September 30, 2006.
(6) "Direct rollover" means a payment by the retirement system
to the eligible retirement plan specified by the distributee.
(7) "Distributee" includes a member or deferred member.
Distributee also includes the member's or deferred member's
surviving spouse or the member's or deferred member's spouse or
former spouse under an eligible domestic relations order, with
regard to the interest of the spouse or former spouse.
(8) Beginning January 1, 2002, except as otherwise provided in
this subsection, "eligible retirement plan" means 1 or more of the
following:
(a) An individual retirement account described in section
408(a) of the internal revenue code, 26 USC 408.
(b) An individual retirement annuity described in section
408(b) of the internal revenue code, 26 USC 408.
(c) An annuity plan described in section 403(a) of the
internal revenue code, 26 USC 403.
(d) A qualified trust described in section 401(a) of the
internal revenue code, 26 USC 401.
(e) An annuity contract described in section 403(b) of the
internal revenue code, 26 USC 403.
(f) An eligible plan under section 457(b) of the internal
revenue
code, 26 USC 457, which that
is maintained by a state, a
political subdivision of a state, or an agency or instrumentality
of
a state or political subdivision of a state and which that
agrees
to separately account for amounts transferred into such the
eligible plan under section 457(b) of the internal revenue code, 26
USC 457, from this retirement system, that accepts the
distributee's eligible rollover distribution. However, in the case
of an eligible rollover distribution to a surviving spouse, an
eligible retirement plan means an individual retirement account or
an individual retirement annuity described above.
(g) Beginning January 1, 2008, except as otherwise provided in
this subsection, "eligible retirement plan" means a Roth individual
retirement account as described in section 408A of the internal
revenue code, 26 USC 408A.
(9) Beginning January 1, 2007, "eligible rollover
distribution" means a distribution of all or any portion of the
balance to the credit of the distributee. Eligible rollover
distribution does not include any of the following:
(a) A distribution made for the life or life expectancy of the
distributee or the joint lives or joint life expectancies of the
distributee and the distributee's designated beneficiary.
(b) A distribution for a specified period of 10 years or more.
(c) A distribution to the extent that the distribution is
required under section 401(a)(9) of the internal revenue code, 26
USC 401.
(d) The portion of any distribution that is not includable in
federal
gross income, except to the extent such the portion of the
distribution is paid to any of the following:
(i) An individual retirement account or annuity described in
section 408(a) or 408(b) of the internal revenue code, 26 USC 408.
(ii) A qualified plan described in section 401(a) of the
internal revenue code, 26 USC 401, or an annuity contract described
in section 403(b) of the internal revenue code, 26 USC 403, and the
plan providers agree to separately account for the amounts paid,
including any portion of the distribution that is includable in
federal
gross income, and the portion of the distribution which
that is not so includable.
(10) "Employee organization professional services leave" or
"professional services leave" means a leave of absence that is
renewed annually by the reporting unit so that a member may accept
a position with a public school employee organization to which he
or
she belongs and which that
represents employees of a reporting
unit in employment matters. The member shall be included in
membership of the retirement system during a professional services
leave if all of the conditions of section 71(5) and (6) are
satisfied.
(11) "Employee organization professional services released
time" or "professional services released time" means a portion of
the school fiscal year during which a member is released by the
reporting unit from his or her regularly assigned duties to engage
in employment matters for a public school employee organization to
which he or she belongs. The member's compensation received or
service
rendered, or both, as applicable, by a the member while on
professional
services released time shall be is
reportable to the
retirement system if all of the conditions of section 71(5) and (6)
are satisfied.
(12) "Final average compensation" means the aggregate amount
of a member's compensation earned within the averaging period in
which the aggregate amount of compensation was highest divided by
the member's number of years, including any fraction of a year, of
credited service during the averaging period. The averaging period
shall
be is 36 consecutive calendar months if the member
contributes to the member investment plan except for a member who
contributes to the member investment plan and first became a member
on
or after July 1, 2010; otherwise, the averaging period shall be
is 60 consecutive calendar months. A member who contributes to the
member investment plan and first became a member on or after July
1, 2010 shall also have an averaging period of 60 consecutive
calendar months. If the member has less than 1 year of credited
service in the averaging period, the number of consecutive calendar
months in the averaging period shall be increased to the lowest
number of consecutive calendar months that contains 1 year of
credited service.
(13) "Health benefits" means hospital, medical-surgical, and
sick care benefits and dental, vision, and hearing benefits for
retirants, retirement allowance beneficiaries, and health insurance
dependents provided pursuant to section 91.
(14) "Health reimbursement account" means that term as defined
in section 2 of the public employee retirement health care funding
act, 2010 PA 77, MCL 38.2732.
(15) (14)
"Internal revenue code"
means the United States
internal revenue code of 1986.
(16) (15)
"Long-term care
insurance" means group insurance
that is authorized by the retirement system for retirants,
retirement allowance beneficiaries, and health insurance
dependents, as that term is defined in section 91, to cover the
costs of services provided to retirants, retirement allowance
beneficiaries, and health insurance dependents, from nursing homes,
assisted living facilities, home health care providers, adult day
care providers, and other similar service providers.
(17) (16)
"Member investment plan"
means the program of member
contributions described in section 43a.
Sec. 8. (1) "Service" means personal service performed as a
public school employee or creditable under this act.
(2) "Simple interest" means interest at 1 or more rates per
annum determined by the retirement board.
(3) "State of Michigan service" means service performed as a
state employee in the classified or unclassified service under the
state employees' retirement act, 1943 PA 240, MCL 38.1 to 38.69.
(4) "Teacher" means a person employed by a reporting unit who
is engaged in teaching, who is engaged in administering and
supervising teaching, or who is under a teacher's contract with a
reporting unit.
(5) "Tier 1" means the retirement plan available to a member
under this act.
(6) "Tier 2" means the state of Michigan 457 plan established
under section 457 of the internal revenue code, 26 USC 457, for
elective employee contributions and the state of Michigan 401(k)
plan established under section 401(k) of the internal revenue code,
26 USC 401, for employer contributions.
(7) "Transition date" means the first day of the pay period
that begins on or after December 1, 2012 for the applicable member.
The retirement system shall determine a method of determining
service credit, compensation, and any applicable contributions for
purposes of implementing provisions of this act that refer to the
transition date.
(8) "Transitional public employment program" means
participation in public service employment programs in the areas of
environmental quality, health care, education, public safety, crime
prevention and control, prison rehabilitation, transportation,
recreation, maintenance of parks, streets, and other public
facilities, solid waste removal, pollution control, housing and
neighborhood improvements, rural development, conservation,
beautification, veterans' outreach, and other fields of human
betterment and community improvement as part of a program of
comprehensive manpower services authorized, undertaken, and
financed under the comprehensive employment and training act of
1973, former Public Law 93-203, 87 Stat. 839.
(9) "Voluntary contributions" means that term as defined in
section 2b of the public employee retirement health care funding
act, 2010 PA 77, MCL 38.2732b.
Sec. 34a. (1) Following the date of the determination
described in subsection (10) and following the date of the election
made under subsection (4), the retirement system shall provide
postretirement medical benefits for eligible members and their
health benefit dependents and postdeath medical benefits for health
benefit dependents who survive a deceased contributor. Medical
benefits shall be provided from a separate account established
under the retirement system pursuant to section 401(h) of the
internal revenue code, 26 USC 401.
(2) A separate account, designated as the "medical benefit
account", shall be maintained within the reserve for health
benefits. The assets of the retirement system in excess of the
amounts then credited to the medical benefit account shall not be
used for providing medical benefits under this section. Except as
otherwise provided in this section, the assets of the retirement
system attributable to amounts then credited to the medical benefit
account shall not be used or diverted for any purpose other than
providing medical benefits.
(3) A separate account, designated as the "medical benefit
administrative account", shall be maintained within the reserve for
health benefits. Administrative costs of maintaining the medical
benefit account shall be paid out of the medical benefit
administrative account. Eligible members making contributions to
the medical benefit account consent as a condition of participation
that transfers may be made from the subaccounts of each contributor
to the medical benefit administrative account equal to no more than
25% of the earnings of funds on account in their respective
subaccounts.
(4) Beginning January 1, 2013, an eligible member may elect to
become a contributor and make contributions to the medical benefit
account in an amount not to exceed the maximum contribution under
subsection (5). An eligible member may elect to make contributions
to the medical benefit account during an election period of not
less than 90 days as determined by the retirement system. Within
the medical benefit account, the department shall maintain a
subaccount for each contributor that reflects all contributions
made by or for that contributor, adjusted for investment experience
and payment of medical benefits. The employer of the contributor
shall pick up the contributor's contributions in whole or in part
and may require that its contributions be derived from a reduction
in the contributor's cash salary. If the contributor's
contributions are picked up by the employer on a salary-reduction
basis, the contributor's election shall be irrevocable to the
extent required by section 401(h) of the internal revenue code, 26
USC 401. Contributions picked up under this subsection on a salary-
reduction basis are not included as gross taxable income of the
contributor. The value of medical benefits provided from a
contributor's subaccount shall not be included in the income of the
retired contributor or the contributor's health benefit dependents.
(5) The benefits to be provided from the medical benefit
account, together with life insurance, if any, provided under the
retirement system, are intended to be subordinate to retirement
benefits under the retirement system. Accordingly, contributions in
calendar years after 2012 credited to a contributor's subaccount,
together with contributions, if any, that may be made to provide
life insurance for the contributor under the retirement system,
shall not exceed an aggregate amount equal to 1/3 of the
contributions, including employee contributions, made for those
years to provide a retirement allowance for the contributor under
Tier 1 or Tier 2 of the retirement system. For purposes of applying
a limitation established by this subsection, the retirement system
may rely on an actuarial certification prepared by the actuary,
demonstrating compliance, and reasonable actuarial assumptions
selected by the actuary shall apply for purposes of determining the
aggregate contributions for retirement allowances to be determined
under this subsection. The retirement system shall determine the
method, timing, and limits applicable to all contributors. In no
case shall a determination made by the retirement system exceed the
maximum provided by this subsection.
(6) All payments or reimbursements of medical benefits shall
be charged against the balance of the retired contributor's
subaccount. Payments or reimbursements shall not be made after the
subaccount has been exhausted. Payment or reimbursement of
premiums, charges, and expenses under this subsection shall be made
only upon presentation of proper documentary evidence of amounts,
dates of coverage or service, recipient of coverage or service, and
such other information as the department requires. Medical benefits
to be provided from the medical benefit account shall consist of
any of the following as applicable:
(a) Payment of premiums for the retired contributor and the
contributor's health benefit dependents under the state health
plan, the state dental plan, and the state vision plan if the
contributor and dependents are enrolled in any of those plans.
(b) Payment or reimbursement of premiums or other charges for
coverage of the retired contributor and the contributor's health
benefit dependents under any group health plan within the meaning
of section 5000(b)(1) of the internal revenue code, 26 USC 5000.
(c) Payment or reimbursement of premiums or other charges to
obtain health insurance coverage within the meaning of section
9832(b)(1) of the internal revenue code, 26 USC 9832, for the
retired contributor and the contributor's health benefit
dependents.
(d) Payment or reimbursement of expenses paid or incurred for
the medical care, as defined in section 213(d)(1) of the internal
revenue code, 26 USC 213, of the retired contributor and the
contributor's health benefit dependents.
(7) While a contributor or retired contributor remains alive,
the department shall comply with the contributor's written
directions in regard to the type of medical benefits to be provided
under this subsection and the allocation of the medical benefits
among the retired contributor and the contributor's health benefit
dependents if the directions comply with this subsection and the
requirements of the department in regard to the form and content of
the written directions. The department shall also afford each
contributor the opportunity to give written directions in regard to
the allocation of medical benefits to and among some or all of the
contributor's surviving health benefit dependents following the
contributor's death as designated on a beneficiary form developed
by the retirement system. Upon death of the contributor and while
funds remain in the contributor's subaccount, the department shall
observe the written directions in allocating medical benefits among
the contributor's surviving health benefit dependents, while giving
the dependents or their legal representatives a reasonable
opportunity to select the type of medical benefits to be provided.
In the absence of valid written directions from the contributor in
regard to the allocation of medical benefits following the
contributor's death, the department shall allocate funds remaining
in the contributor's subaccount to provide medical benefits to the
contributor's surviving health benefit dependents, until all funds
have been expended.
(8) If there is a balance remaining in the subaccount of a
contributor or retired contributor following the deaths of the
contributor and all of the contributor's health benefit dependents,
then that balance shall be forfeited and distributed to the medical
benefit administrative account.
(9) Contributions shall not be picked up by this state
pursuant to this section until the department receives notification
from the United States internal revenue service that such
contributions will not be included as gross income of the
contributor.
(10) This section does not apply until the department receives
notification from the United States internal revenue service that
the establishment of the medical benefit account under this section
does not cause the retirement system to be disqualified for tax
purposes.
(11) A member who is eligible to elect to make contributions
to a medical benefit account created under this section may instead
elect to make contributions to a health reimbursement account under
section 43f.
(12) As used in this section:
(a) "Contributor" means an eligible member who has elected to
make contributions to the medical benefit account created under
this section.
(b) "Eligible member" means a member who became a member or
qualified participant before September 4, 2012.
(c) "Former member" means an individual who was a member and
who terminates employment upon which his or her membership is based
for any reason.
(d) "Former qualified participant" means that term as defined
in section 123.
(e) "Health benefit dependent" means the qualified or former
qualified participant's spouse, if any, and an unmarried child who
is considered a dependent of the qualified or former qualified
participant under section 152 of the internal revenue code, 26 USC
152, if any.
(f) "Retired contributor" means a contributor who meets the
eligibility requirements for a retirement allowance under section
81a.
Sec. 43f. An eligible member may make voluntary contributions
to his or her health reimbursement account in a manner prescribed
in section 10 of the public employee retirement health care funding
act, 2010 PA 77, MCL 38.2740. As used in this section, "eligible
member" means that term as defined in section 34a.