CONTENT

Senate Bill 1133 would amend the State Police Retirement Act to allow certain corrections officers, conservations officers, and other law enforcement officers to be considered members of the Michigan State Police Retirement System (SPRS) hybrid pension plan so long as those officers terminated their positions in the State Employees' Retirement System (SERS) or were entered into payroll after June 5, 2027.

Senate Bill 1134 would amend the State Employees' Retirement Act to do the following:

-- Beginning August 2, 2027, and ending October 15, 2027, allow qualified participants described under Senate Bill 1133 to elect to transition from the SERS to the SPRS.

-- Specify that the transition would take effect January 1, 2028.

-- Specify that employees hired after January 5, 2027, would automatically participate in the SPRS hybrid pension plan, instead of as qualified participants under SERS.

-- Allow an employee who elected to transfer to SPRS to transfer part or all that employee's Tier Two contributions to purchase service credit in the SPRS as described under Senate Bill 1135.

Senate Bill 1135 would amend the State Police Retirement Act to do the following:

-- Allow certain members of the SPRS to purchase service credit for service rendered under the SERS by paying the actuarial value of that service as determined by the SPRS actuary.

-- Prohibit a member from receiving SPRS credit for service if that member were or would be receiving a retirement benefit from the SERS.

-- Require a member intending to purchase service credit to initiate the purchase by October 15, 2027, and to pay in full the purchase within four years of initiating the purchase.

-- Allow payments for purchased service credit to be made through tax-deferred payments and additional payments that would have to be established by the SPRS.

-- Specify that purchased service credit would count toward vesting under the Act.

-- Specify that the bill's provisions would control conflicting provisions in a collective bargaining agreement.

The bills are tie-barred.

MCL 38.1603 & 38.1604 (S.B. 1133)

38.55 et al (S.B. 1134)

Proposed MCL 38.1624c et al (S.B. 1135)

PREVIOUS LEGISLATION

(This section does not provide a comprehensive account of previous legislative efforts on this subject matter.)

Senate Bills 1133 through 1135 are reintroductions of House Bills 4665 through 4667 of the 2023-2024 Legislative Session, respectively. House Bills 4665 through 4667 passed the House and the Senate but were vetoed by the Governor.

Legislative Analyst: Tyler VanHuyse

FISCAL IMPACT

According to the Michigan Department of Corrections (whose employees would represent the largest group affected by the bills), roughly $483.8 million in payroll was in covered positions in the defined contribution (DC) system. The bills would include more than covered positions for Corrections. The Department of Natural Resources has an estimated $17.0 million in payroll for conservation officers, and the Michigan State Police has an estimated $15.9 million in payroll for motor carrier transport and capital properties security. Therefore, the maximum total payroll that could be affected by decisions made by eligible employees was estimated at $516.7 million.

Under the bills, eligible positions would have the choice to enroll in the SPRS pension system (but remain in their existing healthcare coverage). If they wanted years of service already worked to be reflected in an SPRS pension, those employees would have to "buy" into the system and purchase their years of service at an actuarially equivalent cost. Presumably, then, the actual conversion should not affect the unfunded liabilities of the SPRS on the front end. (However, people in the SPRS would become eligible for death and disability provisions immediately and those costs would be unfunded.)

Other unfunded liabilities could accrue in the future if actual conditions failed to meet actuarial assumptions (e.g., if the stock market returned less than the assumed rate in any given year, or people lived longer than the mortality tables assumed), but future liabilities are not known, assumed, or calculated in this analysis. Instead, the analysis focuses on a comparison of the normal cost. The normal cost is the cost paid per year on each person’s salary.

In the SERS DC plan, the normal cost is the maximum State cost (7.56%) applied to salary; in the SPRS plan, the fiscal year 2026-27 pension normal rate is expected to be 14.82% applied to salary, plus 1% (the State's DC match in the Pension Plus plan), for a total of 15.82%.

The difference (15.82% compared to 7.56%) is 8.26% additional normal cost for the SPRS Pension Plus plan. Multiplying the 8.26% difference by $516.7 million in payroll would mean an additional yearly normal pension cost of about $42.7 million.

While the bills would not change retiree healthcare benefits, there are some questions as to how retiree healthcare benefits (for the employees who convert and who currently have defined benefit healthcare in the SERS) would be treated. If employees with retiree healthcare coverage in the SERS converted to the SPRS, and if those benefits in the SERS were frozen (and any new healthcare benefits were in the form of a personal healthcare savings fund), there could be little fiscal impact to the system. There are additional, similar questions on how death and disability benefits would be treated.

Date Completed: 9-10-26 Fiscal Analyst: Kathryn R. Summers