November 30, 2017, Introduced by Reps. Albert, Leutheuser, Howell, Glenn and Lower and referred to the Committee on Michigan Competitiveness.
A bill to create the protecting local government retirement
and benefits act; to provide the powers and duties of certain state
agencies and officials; to create a local government retirement
stability board; and to make appropriations.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the
"protecting local government retirement and benefits act".
Sec. 2. The legislature finds and declares all of the
following:
(a) Nothing in this act or other laws of this state mandate or
otherwise require a local unit of government to create a retirement
system or to provide retirement pension benefits or retirement
health benefits for employees or former employees of the local unit
of government, or for other eligible beneficiaries.
(b) The provision by a local unit of government for a
retirement system or for retirement pension benefits or retirement
health benefits, or both, for employees or former employees of the
local unit of government, or for other eligible beneficiaries, is
an optional activity or service of the local unit of government and
not an activity or service required of a local unit of government
by this act or other laws of this state.
(c) The necessary costs of any activity or service of a local
unit of government relating to a retirement system of the local
unit of government or a retirement pension benefit or a retirement
health benefit for employees or former employees of the local unit
of government, or for other eligible beneficiaries, is an activity
or service of the local unit of government and not of this state.
(d) That unfunded obligations of a local unit of government
relating to retirement systems, retirement pension benefits, and
retirement health benefits can adversely affect the ability of
local units of government to provide governmental services
necessary for the health, safety, and welfare of residents of the
local unit of government.
(e) That significant unfunded obligations of a local unit of
government relating to retirement systems, retirement pension
benefits, and retirement health benefits can adversely affect the
financial solvency of the local unit of government.
(f) The ability of local units of government in this state to
manage their obligations relating to retirement systems, retirement
pension benefits, and retirement health benefits while also
providing governmental services necessary for the health, safety,
and welfare of their residents is vitally necessary to the
interests of the residents of the local units of government and of
this state to assure satisfaction of contractual obligations while
also providing essential governmental services necessary for the
public health, safety, and welfare.
(g) That it is necessary to serve the interests of this state
and protect the credit of its local units of government by
authorizing assistance to local units of government in this state
in managing their contractual obligations and other commitments
relating to retirement systems, retirement pension benefits, and
retirement health benefits in a financially sustainable manner.
(h) Consistent with these mandates, the powers, duties,
functions, and responsibilities provided for under this act are a
necessary program and serve a compelling public purpose.
Sec. 3. As used in this act:
(a) "Annual report" means the most recent audited financial
statement reporting a local unit of government's liability for
retirement pension benefits and retirement health benefits as
determined under applicable government accounting standards of the
Governmental Accounting Standards Board.
(b) "Annual required contribution" means the sum of the normal
cost payment and the annual amortization payment for past service
costs to fund the unfunded actuarial accrued liability.
(c) "Corrective action plan" means a plan that details the
actions to be taken by a local unit of government to address and
resolve the underfunded status of that local unit of government.
(d) "Employee" means an individual holding a position by
election, appointment, or employment in a local unit of government.
(e) "Evaluation system" means the local government retirement
and benefits fiscal impact evaluation system created under section
5 to provide for the identification of, and corrective action plan
to resolve, the underfunded status of a local unit of government
under this act.
(f) "Former employee" means an individual who was an employee
who terminated employment with the applicable local unit of
government.
(g) "General fund operating expenditures" means the sum of all
governmental activity fund revenues of a local unit of government
as determined by the state treasurer based on applicable government
accounting standards of the Governmental Accounting Standards
Board. General fund operating expenditures do not include any fund
of the local unit of government that the state treasurer determines
based on applicable government accounting standards of the
Governmental Accounting Standards Board is a proprietary,
fiduciary, enterprise, or other restricted fund that may not be
expended to provide retirement health benefits or retirement
pension benefits.
(h) "Local government retirement stability board" or "board"
means the local government retirement stability board created in
section 7.
(i) "Local unit of government" means any of the following:
(i) A city.
(ii) A village.
(iii) A township.
(iv) A county.
(v) A county road commission.
(vi) An authority created under chapter VIA of the aeronautics
code of the state of Michigan, 1945 PA 327, MCL 259.108 to
259.125c.
(vii) A metropolitan government or authority established under
section 27 of article VII of the state constitution of 1963.
(viii) A metropolitan district created under the metropolitan
district act, 1929 PA 312, MCL 119.1 to 119.18.
(ix) An authority created under 1939 PA 147, MCL 119.51 to
119.62.
(x) A municipal electric utility system as that term is
defined in section 4 of the Michigan energy employment act of 1976,
1976 PA 448, MCL 460.804.
(xi) A district, authority, commission, public body, or public
body corporate created by 1 or more of the entities described in
subparagraphs (i) to (x).
(j) "Local unit of government" does not include this state, a
principal department of state government, a state institution of
higher education under section 4, 5, or 6 of article VIII of the
state constitution of 1963, a state agency, a state authority, or a
reporting unit under the public school employees retirement act of
1979, 1980 PA 300, MCL 38.1301 to 38.1437.
(k) "Normal cost" means the annual service cost of retirement
health benefits as they are earned during active employment of
employees of the local unit of government in the applicable fiscal
year, using an individual entry-age normal and level percent of pay
actuarial cost method.
(l) "Retirant" means an individual who has retired with a
retirement benefit payable from a retirement system of a local unit
of government.
(m) "Retiree health dependent" means an individual, other than
a former employee, who is eligible to receive retirement health
benefits.
(n) "Retirement benefit" includes a retirement health benefit
or retirement pension benefit, or both.
(o) "Retirement health benefit" means an annuity, allowance,
payment, or contribution to, for, or on behalf of a former employee
or a dependent of a former employee to pay for any of the following
components:
(i) Expenses related to medical, drugs, dental, hearing, or
vision care.
(ii) Premiums for insurance covering medical, drugs, dental,
hearing, or vision care.
(iii) Expenses or premiums for life, disability, long-term
care, or similar welfare benefits for a former employee.
(p) "Retirement pension benefit" means an allowance, right,
accrued right, or other pension benefit payable under a defined
benefit pension plan to a participant in the plan or a beneficiary
of the participant.
(q) "Retirement system" means a retirement system plan or
reserve fund that a local unit of government establishes,
maintains, or participates in and that, by its express terms or as
a result of surrounding circumstances, provides retirement pension
benefits or retirement health benefits, or both. Retirement system
does not include a state unit as that term is defined in section 2
of the public employee retirement benefit protection act, 2002 PA
100, MCL 38.1682.
(r) "Underfunded local unit of government" means a local unit
of government that is in underfunded status.
(s) "Underfunded status" means that the state treasurer has
determined that the local unit of government is underfunded under
the review provided in section 5 and the local unit of government
does not have a waiver under sections 6 and 8(1).
Sec. 4. (1) Beginning July 1, 2018, if a local unit of
government has opted or opts to offer or provide an employee of the
local unit of government, or a former employee first employed by
the local unit of government before the effective date of this act,
with a retirement health benefit, all of the following apply to the
local unit of government:
(a) The local unit of government shall not reopen a defined
benefit retirement system or reoffer any other defined benefit plan
to provide any new retirement health benefits after the effective
date that defined benefit retirement system or other defined
benefit plan has been closed to new hires.
(b) The local unit of government shall not provide the
component of retirement health benefits to a former employee and
his or her retiree health dependents for the period of time during
which the former employee is enrolled in the same component of
active or retiree group health or other welfare benefits offered
under another employer-sponsored program. The local unit of
government shall not provide the component of retirement health
benefits to a retiree health dependent for the period of time
during which the retiree health dependent is enrolled in the same
component of active or retiree group health or other welfare
benefits offered under another employer-sponsored program. The
local unit of government also shall not provide the component of
retirement health benefits to a former employee and his or her
retiree health dependents for the period of time during which the
former employee is eligible for, but does not elect to enroll in,
the same component of active or retiree group health or other
welfare benefits under another employer-sponsored program that is
at least as comparable to the component of retirement health
benefits available by the local unit of government. The local unit
of government shall not provide the component of retirement health
benefits to a retiree health dependent for the period of time
during which the retiree health dependent is eligible for, but does
not elect to enroll in, the same component of active or retiree
group health or other welfare benefits offered under another
employer-sponsored program that is at least as comparable to the
component of retirement health benefits available by the local unit
of government. The local unit of government shall determine, at its
sole discretion, if a component is comparable, including whether it
is offered on at least comparable terms, to the component of
retirement health benefits offered by the local unit of government.
(c) Except as otherwise provided in this section, the local
unit of government may change a current or future retirement health
benefit provided under any applicable plan. If a collective
bargaining agreement entered into before the effective date of this
act clearly and expressly confers a fixed, unalterable right to a
vested retirement health benefit for an unambiguous duration, as
determined using ordinary principles of contract law, this act does
not impair that vested retirement health benefit for that duration.
(d) For a fiscal year of the local unit of government
beginning after June 30, 2019 and before July 1, 2020, at least 20%
of the normal cost must be funded during that fiscal year. For a
fiscal year of the local unit of government beginning after June
30, 2020 and before July 1, 2021, at least 40% of the normal cost
must be funded during that fiscal year. For a fiscal year of the
local unit of government beginning after June 30, 2021 and before
July 1, 2022, at least 60% of the normal cost must be funded during
that fiscal year. For a fiscal year of the local unit of government
beginning after June 30, 2022 and before July 1, 2023, at least 80%
of the normal cost must be funded during that fiscal year. For a
fiscal year of the local unit of government beginning after June
30, 2023, at least 100% of the normal cost must be funded during
that fiscal year.
(e) If the local unit of government has a normal cost funding
requirement under subdivision (d) that will cause an undue hardship
to that local unit of government by diverting significant resources
away from the provision of existing essential services to residents
and businesses, the local unit of government may request a
temporary waiver in whole or in part from the requirements of
subdivision (d) from the local government retirement stability
board. The local unit of government shall submit a waiver
application to the state treasurer, who shall review the
application and provide a recommendation to the board. The board
shall then vote on the waiver application. The board may only grant
1 waiver to the local unit of government under this subdivision.
Any waiver granted by the board under this subdivision must specify
the time period, not to exceed 5 years, that the waiver is in
effect, based on the specific financial circumstances identified in
the waiver application.
(f) The local unit of government or retirement system that
provides retirement health benefits shall require its actuary to
follow actuarial standards of practice adopted by the Actuarial
Standards Board for the actuarial review and valuation of a
retirement system that provides retirement health benefits for the
local unit of government.
(g) The local unit of government shall provide a supplemental
actuarial analysis before adoption of any material proposed benefit
change. The supplemental actuarial analysis must be provided by the
retirement system's actuary and must include an analysis of the
long-term costs of the material proposed benefit change. The
supplemental actuarial analysis must be provided to the decision-
making body that will approve the material proposed benefit change
at least 7 days before the material proposed benefit change is
adopted. If the material proposed benefit change is adopted, the
local unit of government must at least pay the incremental cost
increase in the annual required contribution associated with the
approved proposed benefit change. As used in this subdivision,
"material proposed benefit change" means an increase in the amount
of current or future retirement health benefits provided to persons
entitled to the retirement health benefits that would cause a
reasonable person in the position of a member of the governing body
of the local unit of government to conclude that implementation of
the increase would materially increase an unfunded liability of the
local unit of government or a retirement system of the local unit
of government.
(h) The local unit of government shall submit a summary
retiree health care report on an annual basis to the governing body
of the local unit of government and the department of treasury no
later than 6 months after the end of the local unit of government's
fiscal year. The governing body of the local unit of government
shall take a vote acknowledging the receipt of the summary retiree
health care report. The department of treasury shall post on its
website an executive summary of each summary retiree health care
report submitted to the department of treasury under this
subdivision. The executive summary must include the applicable
system's unfunded actuarial accrued liability for retiree health.
The department of treasury shall submit each executive summary
required under this subdivision to the senate and the house of
representatives appropriations committees and the senate and house
fiscal agencies not less than 30 days after posting.
(2) An irrevocable trust is authorized and created by this act
for each retirement system. An irrevocable trust established under
this subsection must at all times be established and administered
in accordance with section 115 of the internal revenue code of
1986, 26 USC 115. The normal cost funding under subsection (1)(d)
and any other prefunding of retirement health benefits by a local
unit of government for each retirement system must be deposited
into the irrevocable trust. All of the following apply to an
irrevocable trust:
(a) The governing board of each retirement system is the
grantor and shall administer the irrevocable trust created for that
retirement system in order to pay retirement health benefits. The
members of the retirement system board, or the governing body of
the local unit of government if there is no retirement system
board, shall act as the trustees of the irrevocable trust for that
retirement system.
(b) The trustees shall adopt a written trust agreement that
contains all of the following provisions consistent with this act:
(i) Recitals describing the creation and purpose of the trust.
(ii) Language reflecting the requirements of this subsection.
(iii) Sections outlining the management and operation of the
trust.
(iv) A description of the various accounts that carry out the
functions of the trust.
(v) Provisions setting forth the powers and duties of the
trustees.
(vi) Policies and procedures for administering the irrevocable
trust.
(c) Each trust must be managed and operated separately and
independent of the other retirement system trusts. The trustees may
contract with public and private entities for the provision of
bookkeeping, benefit payments, and other plan functions.
(d) Assets contributed to the irrevocable trust are
irrevocable and may not be refused, refunded, or returned to the
employer or employee making the contribution.
(e) The assets of the irrevocable trust are to be used solely
to perform this essential function of the local unit of government.
The trust shall only provide retirement health benefits as provided
under applicable law and pay fees and expenses for the
administrative costs in carrying out this essential governmental
function.
(f) The assets in the irrevocable trust must be invested in
accord with the public employee retirement system investment act,
1965 PA 314, MCL 38.1132 to 38.1141.
(g) The assets of the irrevocable trust and the ability of a
retirant to receive retirement health benefits is not subject to
execution, garnishment, attachment, the operation of bankruptcy or
insolvency laws, or other process of law and is unassignable.
(h) The assets of the irrevocable trust must be used
exclusively for retirement health benefits and must not be diverted
for a purpose other than the payment of retirement health benefits
and the administrative costs of providing retirement health
benefits.
(i) The governing board of a retirement system may from time
to time authorize the deposit into the irrevocable trust any
eligible funds on deposit within its retirement system for the
purpose of payment of eligible retirement health benefits.
Distributions from the irrevocable trust may be made to satisfy the
requirements of the retirement system for retirement health
benefits provided by the retirement system.
(j) The trustees shall cause the annual financial statements
of the trust to be prepared in accordance with generally accepted
accounting principles and an audit to be conducted of those
financial statements by a qualified independent certified
accounting firm for each fiscal year in accordance with generally
accepted auditing standards.
(k) The irrevocable trust is not considered to be invalid
because of any indefiniteness or uncertainty of the persons
designated as beneficiaries. The irrevocable trust is not
considered to be invalid as violating any existing law against
perpetuities, against suspension of the power of alienation of
title to property, or against trusts for the purpose of the
accumulation of income, but each trust may continue for the amount
of time that may be necessary to accomplish the purpose for which
it was created.
(l) All assets and income of the irrevocable trust are exempt
from taxation by this state or any political subdivision of this
state. Distributions from the irrevocable trust shall not be
treated as taxable income to former employees or their retiree
health dependents by this state or any political subdivision of
this state.
(m) A trustee of the irrevocable trust is not any of the
following:
(i) Personally liable for any liability, loss, or expense
suffered by the trust, unless the liability, loss, or expense
arises out of or results from the willful misconduct or intentional
wrongdoing of the trustee.
(ii) Responsible for the adequacy of the trust to meet and
discharge any obligation under applicable law.
(iii) Required to take action to enforce the payment of any
contribution or appropriation to the trust.
(n) The trustees of the irrevocable trust may be indemnified
by the trust against costs, liabilities, losses, damages, and
expenses, including their attorney fees, as more fully provided in
the respective trust agreements, unless the costs, liabilities,
losses, damages, or expenses arise out of or result from the
willful misconduct or intentional wrongdoing of a trustee.
(o) Any assets remaining in the irrevocable trust after all
payments for eligible retirement health benefits have been paid and
all other liabilities of the trust have been satisfied must be
distributed to this state, the local unit of government, or other
employers within the applicable retirement system if the employers
are organizations, the income of which is excluded under section
115(1) of the internal revenue code of 1986, 26 USC 115.
(3) As used in this section, "summary retiree health care
report" means a report that includes all of the following for each
retirement system of the local unit of government that provides
retirement health benefits:
(a) The name of the retirement system.
(b) The names of the retirement system's investment
fiduciaries.
(c) The names of the retirement system's service providers.
(d) The retirement system's assets and liabilities and changes
in net plan assets on a plan-year basis.
(e) The retirement system's funded ratio based on the ratio of
valuation assets to actuarial accrued liabilities on a plan-year
basis.
(f) The assumed rate of return of the retirement system.
(g) The actual rate of return of the retirement system for the
previous 1-year period, the previous 5-year period, and the
previous 10-year period.
(h) The discount rate used by the retirement system.
(i) The retirement system's amortization method for unfunded
liability, indicating whether it is open or closed.
(j) The retirement system's amortization method, indicating
whether it is level percent or level dollar, and the assumed
payroll growth rate.
(k) The retirement system's remaining amortization time
period.
(l) The annual required contribution for the retirement
system, indicating the normal cost and unfunded actuarial accrued
liability.
Sec. 4a. Beginning July 1, 2018, if a local unit of government
has opted or opts to offer or provide an employee of the local unit
of government, or a former employee first employed by the local
unit of government before the effective date of this act, with a
retirement pension benefit, all of the following apply to the local
unit of government:
(a) The local unit of government shall not provide retirement
pension benefits through a defined benefit retirement system or
other defined benefit plan to an individual first elected or
appointed to an elective office of the local unit of government
after June 30, 2018 if the individual is new to the defined benefit
retirement system or defined benefit plan. As used in this
subdivision, "elective office" does not include a county sheriff.
(b) If a proposed benefit change is adopted, the local unit of
government must pay at least the incremental cost increase in the
annual required contribution associated with the approved proposed
benefit change. As used in this subdivision, "proposed benefit
change" means a proposal to increase the amount of current or
future retirement pension benefits received by individuals entitled
to those benefits.
(c) The local unit of government shall not reopen a defined
benefit retirement system or reoffer any other defined benefit plan
to provide any new retirement pension benefits after the effective
date that defined benefit retirement system or other defined
benefit plan has been closed to new hires.
(d) Except as provided in this subdivision, beginning with
fiscal years that begin after December 31, 2020, the local unit of
government shall not use or apply a rolling amortization method, an
open amortization method, or other adjustable amortization method
for an unfunded actuarial accrued liability of retirement pension
benefits under a retirement system of the local unit of government.
An amortization period for an unfunded actuarial accrued liability
of retirement pension benefits under a retirement system of the
local unit of government may not be extended by the local unit of
government after December 31, 2020. The local unit of government
may request and the state treasurer may grant 1 extension of the
December 31, 2020 deadline under this subdivision to a new deadline
no later than December 31, 2025. The state treasurer may approve
the extension of an amortization period in effect as of the
effective date of this act, if, after consultation with, and
agreement by, the retirement system fiduciary, the local unit of
government requests an extension of the amortization period and the
state treasurer determines that the extension is in the best
financial interests of the local unit of government.
Sec. 5. (1) The state treasurer shall promulgate rules under
the administrative procedures act of 1969, 1969 PA 306, MCL 24.201
to 24.328, to establish standards for local units of government for
actuarial assumptions and other methods of valuation of retirement
systems that include, but are not limited to, standard ranges for
investment returns, salary increase rates, amortization of unfunded
liabilities, mortality updates, discount rates, and health care
inflation.
(2) The state treasurer shall create an evaluation system and
provide for review and oversight under this act of an underfunded
local unit of government beginning on the effective date of the
determination by the state treasurer that the local unit of
government is in underfunded status.
(3) Each year beginning after December 31, 2017, the state
treasurer shall determine the underfunded status of each local unit
of government.
(4) The state treasurer shall determine that a local unit of
government is in underfunded status if any of the following apply:
(a) The actuarial accrued liability of a retirement health
system of the local unit of government is less than adequately
funded, according to the most recent annual report, and, if the
local unit of government is a city, village, township, or county,
the annual required contribution for all of the retirement health
systems of the local unit of government is greater than 10% of the
local unit of government's annual general fund operating
expenditures, based on the most recent fiscal year. As used in this
subdivision, "adequately funded" means the following amounts for
the following fiscal years:
(i) For a fiscal year of the local unit of government
beginning after June 30, 2016 and before July 1, 2023, at least 30%
funded.
(ii) For a fiscal year of the local unit of government
beginning after June 30, 2023 and before July 1, 2028, at least 35%
funded.
(iii) For a fiscal year of the local unit of government
beginning after June 30, 2028 and before July 1, 2033, at least 40%
funded.
(iv) For a fiscal year of the local unit of government
beginning after June 30, 2033 and before July 1, 2038, at least 45%
funded.
(v) For a fiscal year of the local unit of government
beginning after June 30, 2038 and before July 1, 2048, at least 50%
funded.
(vi) For a fiscal year beginning after June 30, 2048, at least
80% funded.
(b) The actuarial accrued liability of a retirement pension
system of the local unit of government is less than adequately
funded, according to the most recent annual report, and, if the
local unit of government is a city, village, township, or county,
the annual required contribution for all of the retirement pension
systems of the local unit of government is greater than 10% of the
local unit of government's annual general fund operating
expenditures, based on the most recent fiscal year. As used in this
subdivision, "adequately funded" means the following amounts for
the following fiscal years:
(i) For a fiscal year of the local unit of government
beginning after June 30, 2016 and before July 1, 2023, at least 60%
funded.
(ii) For a fiscal year of the local unit of government
beginning after June 30, 2023 and before July 1, 2028, at least 65%
funded.
(iii) For a fiscal year of the local unit of government
beginning after June 30, 2028 and before July 1, 2033, at least 70%
funded.
(iv) For a fiscal year of the local unit of government
beginning after June 30, 2033 and before July 1, 2038, at least 75%
funded.
(v) For a fiscal year of the local unit of government
beginning after June 30, 2038, at least 80% funded.
(c) The local unit of government has not reported annual cost
of the liability of the retirement health system or retirement
pension system using data required under the rules promulgated
under subsection (1).
(d) The local unit of government demonstrates to the state
treasurer or local government retirement stability board and the
state treasurer or local government retirement stability board
determines that it does not have adequate financial resources to
make its annual required contributions for retirement pension
benefits or retirement health benefits, and the governing body of
the local unit of government requests to have underfunded status
for purposes of this act.
(5) The state treasurer shall post publicly on the department
of treasury website all of the following:
(a) The rules promulgated under subsection (1).
(b) The underfunded status of local units of government as
determined under subsection (3).
(c) The current waiver status of local units of government
provided under sections 6 and 8(1), including any report provided
under section 6(4).
(d) Any corrective action plan approved under section 10.
(e) All declarations of financial emergencies within local
units of government under section 11.
(6) A local unit of government shall post publicly on its
website, or in a public place if it does not have a website, the
information as provided in subsection (5) that is applicable to
that local unit of government.
Sec. 6. (1) The state treasurer shall issue a waiver of the
determination of underfunded status for a local unit of government
if the state treasurer determines that the underfunded status is
adequately being addressed by that local unit of government based
on a review of relevant factors that include all of the following:
(a) The degree to which the local unit of government provides
retirement benefits.
(b) The local unit of government's proximity to the funded
ratio and expenditure percentage as provided under the evaluation
system.
(c) The local unit of government's demonstrated ability to
address any underfunded status in prior fiscal years.
(d) The local unit of government's adherence to any prior
corrective action plans after a determination of underfunded
status.
(e) A review of the amount of any general fund operating
expenditures of the local unit of government that are dedicated to
the prefunding of retirement benefits.
(f) A review of the local unit of government's summary retiree
health care report prepared under section 4, including any trend
lines as provided in that report.
(2) The state treasurer shall rescind his or her waiver under
subsection (1) if the state treasurer determines that any of the
following have occurred or that there is a substantial likelihood
that any of the following will imminently occur:
(a) The underfunded local unit of government violates this act
or any mandatory financial controls in a manner that substantially
impairs that underfunded local unit of government's ability to pay
principal of and interest on municipal securities or other debt
when due and payable or its ability to adhere to a balanced budget.
(b) The underfunded local unit of government violates a
provision of a corrective action plan for the local unit of
government.
(3) If the state treasurer finds that the circumstances no
longer exist under which a waiver under subsection (2) was
rescinded, the state treasurer shall reverse the rescission as
provided in subsection (2) and reinstate the waiver.
(4) The state treasurer shall provide the local government
retirement stability board with a written report that sets forth
the reason for any waiver granted under subsection (1) or any
waiver reinstated under subsection (3).
Sec. 7. (1) The local government retirement stability board is
created within the department of treasury. Except as otherwise
provided in this act, the board shall exercise its powers, duties,
and functions independently of the state treasurer. The budgeting,
procurement, and related management functions of the board must be
performed under the direction and supervision of the state
treasurer. The department of treasury shall provide administrative
support to the board.
(2) The board consists of all of the following members:
(a) One resident of this state with knowledge, skill, or
experience in accounting, actuarial science, retirement systems,
retirement health benefits, or government finance appointed by the
governor.
(b) One resident of this state with knowledge, skill, or
experience in accounting, actuarial science, retirement systems,
retirement health benefits, or government finance appointed by the
governor from a list of 3 or more nominees submitted by the speaker
of the house.
(c) One resident of this state with knowledge, skill, or
experience in accounting, actuarial science, retirement systems,
retirement health benefits, or government finance appointed by the
governor from a list of 3 or more nominees submitted by the senate
majority leader.
(3) Of the members initially appointed by the governor under
subsection (2)(a) to (c), 1 member must be appointed for an initial
term of 4 years, 1 member must be appointed for an initial term of
3 years, and 1 member must be appointed for an initial term of 2
years. After the initial terms, members appointed by the governor
under subsection (2)(a) to (c) must be appointed for terms of 4
years.
(4) A vacancy for an unexpired term must be filled in the same
manner as the original appointment for the remainder of the term.
After the expiration of a term, a member may continue to serve
until a successor is appointed and qualified.
(5) The member of the board appointed under subsection (2)(a)
shall serve as the chairperson of the board.
(6) A majority of the members of the board authorized to take
an action constitute a quorum of the board for the transaction of
business on that action. The board shall meet not less than
quarterly and at the times and places within this state designated
by the chairperson. An action of the board must be approved by a
majority of the members authorized to take that action.
(7) A writing prepared, owned, used, in the possession of, or
retained by the board in the performance of an official function is
exempt from disclosure by the board under section 13(1)(d) of the
freedom of information act, 1976 PA 442, MCL 15.243.
(8) The board shall adopt bylaws for governance of the board,
which must, at a minimum, address the procedures for conducting
meetings, including voting procedures, and the requirements of its
members to attend meetings. Bylaws required by this section are not
subject to the administrative procedures act of 1969, 1969 PA 306,
MCL 24.201 to 24.328.
(9) The board may contract for professional services, as it
requires, and shall determine the qualifications for persons
providing those professional services it considers necessary.
(10) Members of the board serve without compensation but may
receive reimbursement for travel and expenses incurred in the
discharge of official duties. The members of the board and
contractors or agents of the board are subject to 1968 PA 317, MCL
15.321 to 15.330, and 1968 PA 318, MCL 15.301 to 15.310.
(11) A member of the board, and any person the board contracts
with, shall discharge the duties of his or her position in a
nonpartisan manner, with good faith, and with that degree of
diligence, care, and skill that an ordinarily prudent person would
exercise under similar circumstances in a like position. The board
shall adopt an ethics policy governing the conduct of board members
and officers and employees of the board.
(12) Board members shall take and subscribe to the
constitutional oath of office under section 1 of article XI of the
state constitution of 1963. The oath must be filed with the
secretary of state.
(13) As used in this section, "professional services" means
services that require a high degree of intellectual skill, an
advanced degree, or professional licensing or certification. Those
providing the professional services must be distinguished based on
their specialized knowledge, experience, and expertise.
Professional services include, but are not limited to, accounting,
actuarial, appraisal, auditing, investment advisor, and legal
services.
Sec. 8. (1) The board shall review a written report provided
by the state treasurer under section 6(4) and may rescind a waiver
granted by the state treasurer under section 6(1) or reinstated by
the state treasurer under section 6(3).
(2) The board shall monitor compliance of an underfunded local
unit of government with the requirements of this act and of any
corrective action plan for the underfunded local unit of
government. The board shall by October 1 of each year certify that
the underfunded local unit of government is in substantial
compliance with this act.
(3) The board may require an underfunded local unit of
government to provide verification of compliance with this section.
Sec. 9. The board may review and vote on the approval of
corrective action plans for a local unit of government that has
been determined to be in underfunded status based on what the board
determines is in the best financial interests of the local unit of
government.
Sec. 10. (1) The board shall review and vote on the approval
of a corrective action plan submitted by a local unit of
government. A local unit of government that is in underfunded
status shall submit a corrective action plan to the board within
180 days after the determination of underfunded status. The board
may extend the 180-day deadline by up to an additional 45 days if
the local unit of government submits a reasonable draft of a
corrective action plan and requests an extension. The corrective
action plan must be negotiated with active employees and retirants.
The governing body of the local unit of government shall approve
the corrective action plan before submission to the board. The
board shall approve or reject a corrective action plan within 45
days after it is submitted.
(2) A corrective action plan may include the corrective
options for correcting underfunded status as set forth in
subsection (8) and any additional solutions to assist with reducing
annual expenses or improving funding levels related to its
underfunded status to maintain and preserve retirement pension
benefits and retirement health benefits. A local unit of government
may also include in its corrective action plan a review of the
local unit of government's budget and finances to determine any
alternative methods available to assist in the ability to fund or
finance the retirement pension benefits or retirement health
benefits of the local unit of government.
(3) The board may review the inclusion of the corrective
options and additional solutions as described in subsection (8) as
part of its approval criteria to determine whether a corrective
action plan is designed to permanently remove the local unit of
government from underfunded status.
(4) Subject to any corrective action plan and any collective
bargaining agreements still in effect, the local unit of government
has up to 180 days after the approval of a corrective action plan
to implement the corrective action plan or otherwise negotiate with
active employees and retirants to achieve the necessary cost
reductions and funding improvements to permanently correct its
underfunded status in all future years.
(5) A local unit of government, if required by the board,
shall present written reports regarding its progress under this
section and shall permit the local government retirement stability
board to audit or inspect financial statements, actuarial reports,
revenue estimates, and any other documents, data, reports, or
findings that the board considers necessary to carry out this act.
(6) The board shall monitor each underfunded local unit of
government's compliance with this act and any corrective action
plan. The board shall adopt a schedule, not less than every 2
years, to certify that the underfunded local unit of government is
in substantial compliance with this act.
(7) Except as otherwise provided in this act, while any
corrective action plan is in effect for an underfunded local unit
of government, that local unit of government is not required to
submit any additional corrective action plan for approval.
(8) A corrective action plan of corrective options for the
local unit of government to address and permanently resolve its
underfunded status. Except as otherwise provided in this
subsection, this section does not mandate that the local unit of
government reduce retirement pension benefits or retirement health
benefits. The corrective options as described in this section may
include 1 or more of the following:
(a) Requiring additional employer contributions for retirement
pension benefits or retirement health benefits.
(b) Requiring additional employee contributions for any future
retirement pension benefits to be accrued, or for any applicable
retirement health benefits.
(c) Requiring adjustment of debt structure, altering of
eligibility, calculation of benefits, copays, drug prescription
coverage, or other modification of provisions of an applicable
retirement system.
(d) Submitting to the electors of the local unit of government
a ballot question authorized by the laws of this state or the
charter of the local unit of government addressing the underfunded
status of the local unit of government for decision by the electors
of the local unit of government, including, but not limited to, a
ballot question on the imposition of a new millage or increasing or
renewing a millage levied by the local unit of government. A ballot
question described in this subdivision must comply with the
Michigan election law, 1954 PA 116, MCL 168.1 to 168.992. If a
ballot question described in this subdivision is a proposal on the
question of authorizing the issuance of bonds, imposing a new
millage, or increasing or renewing an existing millage, the ballot
question also must comply with the requirements of section 24f of
the general property tax act, 1893 PA 206, MCL 211.24f, and any new
or increased millage approved by the electors of the local unit of
government must be used only by the local unit of government for
purposes authorized by the electors and must not be attributed or
transmitted to or retained or captured by any other governmental
entity for any other purpose. A corrective action plan must include
alternative corrective options to be implemented by the local unit
of government if a ballot question provided for in the corrective
action plan is not approved by the electors of the local unit of
government.
(e) Limiting the annual amount the local unit of government
may pay toward the cost of providing retirement health benefits to
former employees and retiree health dependents. A limitation under
this subdivision may include 1 or more of the following:
(i) Implementing a maximum payment permitted for each coverage
category of retirement health benefits, subject to a specified
increase in coverage years beginning the succeeding calendar year,
based on the change in the medical care component of the United
States Consumer Price Index for the most recent 12-month period for
which data are available from the United States Department of
Labor, Bureau of Labor Statistics.
(ii) Requiring the local unit of government to pay no more
than 80% of the total annual cost for all retirement health
benefits it provides to its former employees and retiree health
dependents.
(iii) Implementing a cap on the total amount the local unit of
government may pay for the cost of providing retirement health
benefits.
(f) The levy of a property tax required to meet an
appropriation made by the local unit of government authorized under
the fire fighters and police officers retirement act, 1937 PA 345,
MCL 38.551 to 38.562, as permitted under that act.
(g) Requiring the local unit of government to require each
individual included in a beneficiary unit to enroll in Medicare
part A and part B when first eligible, or within 6 months after the
effective date of an applicable corrective action plan for each
individual included in a beneficiary unit that is past his or her
eligibility to enroll in Medicare part A and part B, in order to
qualify for retirement health benefits from a local unit of
government. The local unit of government shall require each
individual included in a beneficiary unit to provide the local unit
of government, in the form as the local unit of government
prescribes, the information as is necessary to confirm the
enrollment as required under this subsection. If an individual
included in a beneficiary unit does not enroll and submit the
information required, the individual is no longer eligible for any
retirement health benefits provided by the local unit of
government. If each individual included in a beneficiary unit is
eligible for Medicare, the local unit of government shall not pay
more than the total annual cost of a retirement health benefit that
is a supplement to reimbursements under Medicare for the
beneficiary unit.
(h) Requiring the local unit of government to not subsidize
retirement health insurance benefits for any employee who was first
employed by the local unit of government after a specified date in
the future.
(9) As used in this section:
(a) "Beneficiary unit" means a former employee who is entitled
to retirement health benefits and his or her retiree health
dependents.
(b) "Medicare" means benefits under the federal Medicare
program established under title XVIII of the social security act,
42 USC 1395 to 1395lll.
Sec. 11. (1) If any of the following events occur, the state
treasurer shall declare that a financial emergency exists within
the local unit of government for the purposes of section 9a of the
local financial stability and choice act, 2012 PA 436, MCL
141.1549a:
(a) The local unit of government cannot reach agreement on the
formation of a proposed corrective action plan.
(b) The board does not approve the corrective action plan that
is proposed by the local unit of government.
(c) The board determines that the approved corrective action
plan is not being implemented in a manner that will accomplish its
objectives.
(2) The state treasurer shall notify the governor in writing
of a declaration under subsection (1).
Sec. 12. (1) The board is a state board and its members are
state officers for the purposes of section 6419 of the revised
judicature act of 1961, 1961 PA 236, MCL 600.6419.
(2) The validity of the board is conclusively presumed unless
questioned in an original action filed in the court of claims
within 60 days after the effective date of this act. The court of
claims has original jurisdiction to hear an action under this
subsection. The court shall hear the action in an expedited manner.
The department of treasury is a necessary party in an action under
this subsection.
(3) The validity of a corrective action plan for a local unit
of government under section 10 is conclusively presumed unless
questioned in an original action filed in the court of claims
within 60 days after the effective date of the corrective action
plan. The court of claims has original jurisdiction to hear an
action under this subsection. The court shall hear the action in an
expedited manner. The department of treasury is a necessary party
in an action under this subsection.
(4) The court of claims has exclusive jurisdiction over any
action challenging the validity of this act or an action or
inaction under this act. The department of treasury is a necessary
party in an action under this subsection.
Sec. 13. A contract or agreement, or a provision of a contract
or agreement, entered into, modified, extended, or renewed after
the effective date of this act that conflicts with the requirements
or restrictions of this act is void.
Sec. 14. The provisions of this act apply notwithstanding a
contrary provision of a charter, articles of incorporation, or
other organizational document of a local unit of government, or of
a contrary provision of an ordinance or resolution of a local unit
of government.
Sec. 15. For the fiscal year ending September 30, 2018,
$1,500,000.00 is appropriated from the general fund to the
department of treasury for purposes of implementing this act.
Sec. 16. An obligation of a local unit of government that
relates to retirement pension benefits or retirement health
benefits is not an obligation of this state. This act does not
authorize the lending of the credit of this state. This act does
not authorize the diminishment or impairment of a contractual
obligation under section 24 of article IX of the state constitution
of 1963.