Bill Text: MI HB4530 | 2019-2020 | 100th Legislature | Introduced

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Bill Title: Retirement; state police; calculation of unfunded actuarial accrued liability contributions; modify. Amends secs. 11 & 14 of 1986 PA 182 (MCL 38.1611 & 38.1614).

Spectrum: Partisan Bill (Republican 2-0)

Status: (Introduced - Dead) 2019-05-01 - Bill Electronically Reproduced 05/01/2019 [HB4530 Detail]

Download: Michigan-2019-HB4530-Introduced.html

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HOUSE BILL No. 4530

 

 

April 30, 2019, Introduced by Reps. Albert and Lower and referred to the Committee on Appropriations.

 

     A bill to amend 1986 PA 182, entitled

 

"State police retirement act of 1986,"

 

by amending sections 11 and 14 (MCL 38.1611 and 38.1614), as

 

amended by 2018 PA 674.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 11. (1) The retirement board, in consultation with the

 

department, shall engage an actuary, in conformance with section

 

261 of the management and budget act, 1984 PA 431, MCL 18.1261.

 

     (2) The actuary shall prepare an annual valuation of the

 

assets, liabilities, financial condition, and contribution rate of

 

the retirement system, upon on information supplied by the

 

department.

 

     (3) The retirement board and the department shall conduct and

 

review an experience investigation study and adopt risk assumptions

 

on which actuarial valuations are to be based, after consultation

 

with the actuary, and the state treasurer. Beginning with the state

 

fiscal year ending September 30, 2021 and for each subsequent state

 

fiscal year, the actuary shall use the most recent mortality

 

assumptions provided by the Actuarial Standards Board and adopted

 

as risk assumptions under this subsection. The experience

 

investigation study must be periodically reviewed at least once

 

every 5 years.

 

     (4) Every April 1 following a periodic review of risk

 

assumptions under subsection (3), the office of retirement services

 

on behalf of the department and the state treasurer shall

 

collaborate to submit a report to the senate majority leader, the

 

speaker of the house of representatives, the senate and house of

 

representatives appropriations committees, the senate and house

 

fiscal agencies, and the department of state police. A report

 

required under this subsection must be published on the office of

 

retirement services's website and include at least all of the

 

following:

 

     (a) Forecasted rate of return on investments at all of the

 

following probability levels:

 

     (i) 5%.

 

     (ii) 25%.

 

     (iii) 50%

 

     (iv) 75%.

 

     (v) 95%.

 

     (b) The actual rate of return on investments for 10-, 15-, and

20-year time intervals.

 

     (c) Mortality assumptions.

 

     (d) Retirement age assumptions.

 

     (e) Payroll growth assumptions.

 

     (f) Any other assumptions that have a material impact on the

 

financial status of the retirement system.

 

     Sec. 14. (1) The funding objective of the retirement system is

 

to establish and receive contributions during each fiscal year that

 

are sufficient to fully do both of the following: (a) Fully cover

 

the actuarial cost of benefits likely to be paid on account of

 

services rendered by members during the fiscal year, which is the

 

normal cost requirements of the retirement system. , and finance

 

(b) Finance the unfunded actuarial costs of benefits likely to be

 

paid on account of service rendered before the fiscal year, which

 

is the unfunded actuarial accrued liability of the retirement

 

system, and health, dental, and vision insurance.

 

     (2) Subject to subsections (5) to (7), the annual level

 

percentage of payroll contribution rate must be actuarially

 

determined using experience assumptions and level percent of

 

payroll actuarial cost methods adopted by the retirement board and

 

the department pursuant to an annual actuarial valuation, which

 

must be sufficient to finance benefits being provided and to be

 

provided by the retirement system. Beginning with the state fiscal

 

year ending September 30, 2021 and for each subsequent fiscal year,

 

the retirement system shall use layered amortization. As used in

 

this subsection, "layered amortization" means a fixed and closed

 

period that separately layers the different components to be

amortized over a fixed period not to exceed 10 years, as it

 

emerges. The amortization period for layered amortization must use

 

a level dollar amortization method.

 

     (3) Subject to subsections (5) to (7), except as otherwise

 

provided in this subsection, for differences occurring in fiscal

 

years beginning on or after October 1, 2001, 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 (2), 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 must 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. Beginning in the state fiscal

 

year ending September 30, 2022 and each state fiscal year

 

thereafter, not less than 60 days after the end of the fiscal year,

 

the office of retirement services shall certify to the department

 

the difference between the estimated and the actual aggregate

 

compensation and the estimated and the actual contribution rate

 

described in subsection (2), if any. The legislature shall

 

appropriate the amount certified under this subsection in the next

 

fiscal year. In addition, interest must be included for each year

 

that a portion of the remaining difference is carried forward. The

 

interest rate must equal the actuarially assumed rate of investment

 

return for the state fiscal year in which payment is made.

 

     (4) For each fiscal year that begins on or after October 1,

2003, if the actuarial valuation prepared under 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 amount based on the annual level percent of payroll

 

contribution rate under subsections (1) and (2) may be deposited

 

into the health advance funding subaccount created by section 42.

 

     (5) Beginning with the state fiscal year ending September 30,

 

2022 until the pension and retiree health care payroll growth

 

assumption rate is zero, the payroll growth assumption rate must be

 

reduced by 50 basis points. Beginning with the state fiscal year

 

ending September 30, 2022, the office of retirement services within

 

the department of technology, management, and budget and the

 

retirement board may agree to reduce the rate described in this

 

subsection by any number of additional basis points.

 

     (6) Beginning with the state fiscal year ending September 30,

 

2019 and for each subsequent fiscal year, the normal cost

 

contribution rate must not be less than the normal cost

 

contribution rate in the immediately preceding fiscal year.

 

Additionally, the employer portion of the contribution rate must

 

not be less than the employer portion of the contribution rate in

 

the immediately preceding fiscal year.

 

     (7) Subject to the requirements of this subsection, beginning

 

with the state fiscal year ending September 30, 2019 and for each

 

subsequent fiscal year until the unfunded actuarial accrued

liability is paid off, the unfunded actuarial accrued liability

 

contribution sum and amount due and payable must not be less than

 

the unfunded actuarial accrued liability contribution sum and

 

amount due and payable in the immediately preceding fiscal year.

 

The unfunded actuarial accrued liability must be paid off no later

 

than September 30, 2038. Additionally, the employer portion of the

 

unfunded actuarial accrued liability contribution sum and amount

 

due and payable must not be less than the employer portion of the

 

unfunded actuarial accrued liability contribution sum and amount

 

due and payable in the immediately preceding fiscal year.

 

     (8) 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, 2002 PA 100, MCL 38.1686, the benefits that are required to be

 

paid from that fund must 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 must 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.

 

     (9) Beginning with the state fiscal year ending September 30,

 

2021 and for each subsequent state fiscal year, the actuary used by

 

the retirement board shall assume a rate of return on investments

 

of and a discount rate not more than 6% per annum, as of September

 

30, 2020, which rate may only be changed with the approval of the

 

retirement board and the director of the department.