Bill Text: MI HB4647 | 2017-2018 | 99th Legislature | Engrossed

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Bill Title: Retirement; public school employees; defined contribution only for employees hired after certain date; require, and provide for other general amendments. Amends secs. 5, 41, 81d, 127 & 131 of 1980 PA 300 (MCL 38.1305 et seq.) & adds secs. 21a & 133.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Engrossed - Dead) 2017-06-21 - Referred To Committee On Education [HB4647 Detail]

Download: Michigan-2017-HB4647-Engrossed.html

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HB-4647, As Passed House, June 15, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

SUBSTITUTE FOR

 

HOUSE BILL NO. 4647

 

 

 

 

 

 

 

 

 

 

 

 

      A bill to amend 1980 PA 300, entitled

 

"The public school employees retirement act of 1979,"

 

by amending sections 5, 41, 41b, 42, 43a, 69, 69c, 69f, 70, 71, 75,

 

81c, 81d, 108, 127, 131, and 131a (MCL 38.1305, 38.1341, 38.1341b,

 

38.1342, 38.1343a, 38.1369, 38.1369c, 38.1369f, 38.1370, 38.1371,

 

38.1375, 38.1381c, 38.1381d, 38.1408, 38.1427, 38.1431, and

 

38.1431a), sections 5, 42, 43a, 108, and 131 as amended and

 

sections 81d and 131a as added by 2012 PA 300, section 41 as

 

amended by 2016 PA 136, sections 41b, 81c, and 127 as added by 2010

 

PA 75, sections 69, 69c, and 70 as amended and section 69f as added

 

by 1989 PA 194, section 71 as amended by 1996 PA 268, and section

 

75 as amended by 2006 PA 617, and by adding sections 79b and 92c.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

 1        Sec. 5. (1) "Member" means a public school employee, except

 

 2  that member does not include any of the following:

 

 3        (a) A person An individual enrolled in a neighborhood youth

 

 4  corps program operated with funds from the federal office of

 

 5  economic opportunity or a person an individual enrolled in a

 

 6  comparable youth training program designed to prevent high school

 

 7  dropouts and rehabilitate high school dropouts operated by an

 

 8  intermediate school district.

 

 9        (b) A person An individual enrolled in a transitional public

 

10  employment program and employed by a reporting unit.

 

11        (c) A person An individual employed by a reporting unit while

 

12  enrolled as a full-time student in that same reporting unit.

 

13        (d) A person An individual who elects to participate in the

 

14  optional retirement program under the optional retirement act of

 

15  1967, 1967 PA 156, MCL 38.381 to 38.388.

 

16        (e) A retirant of this retirement system.

 

17        (f) A person, An individual, not regularly employed by a

 

18  reporting unit, who is employed by a reporting unit through a

 

19  summer youth employment program established pursuant to under the

 

20  Michigan youth corps act, 1983 PA 69, MCL 409.221 to 409.229.

 

21        (g) A person, An individual, not regularly employed by a

 

22  reporting unit, who is employed by a reporting unit to administer a

 

23  program described in subdivision (f), (h), (i), (j), or (k).

 

24        (h) After September 30, 1983, a person, an individual, not

 

25  regularly employed by a reporting unit, who is employed by a

 

26  reporting unit through participation in a program established

 

27  pursuant to under the former job training partnership act, Public

 1  Law 97-300, 96 Stat. Stat 1322 or beginning July 1, 2000, the

 

 2  workforce investment act of 1998, Public Law 105-220, 112 Stat.

 

 3  Stat 936.

 

 4        (i) A person, An individual, not regularly employed by a

 

 5  reporting unit, who is employed by a reporting unit through

 

 6  participation in a program established pursuant to under the work

 

 7  first PATH program under section 57f of the social welfare act,

 

 8  1939 PA 280, MCL 400.57f.

 

 9        (j) A person, An individual, not regularly employed by a

 

10  reporting unit, who is employed by a reporting unit through

 

11  participation in a program established pursuant to under the

 

12  Michigan community service corps program, first established under

 

13  sections 25 to 35 of 1983 PA 259.

 

14        (k) A person, An individual, not regularly employed by a

 

15  reporting unit, who is employed by a reporting unit through

 

16  participation in a program established pursuant to under the older

 

17  American community service employment program under the older

 

18  American community service employment act, title V of the older

 

19  Americans act of 1965, Public Law 89-73, 42 USC 3056 to

 

20  3056i.3056p.

 

21        (l) A person, An individual, not regularly employed by a

 

22  reporting unit, who is employed by a reporting unit in a temporary,

 

23  intermittent, or irregular seasonal or athletic position and who is

 

24  under the age of 19 years.

 

25        (m) A person, An individual, not regularly employed by a

 

26  reporting unit, who is employed by a reporting unit only in a

 

27  temporary position to assist in the conduct of a school election.

 1        (n) A qualified participant who makes a valid election under

 

 2  section 81d 81d(1) to not become a member of Tier 1.

 

 3        (o) A qualified participant who is not a member of Tier 1

 

 4  under section 81d(4).

 

 5        (2) "Membership service" means service performed after June

 

 6  30, 1945.

 

 7        (3) "Noncontributory plan" means the plan which began between

 

 8  July 1, 1974 and July 1, 1977, in which the reporting unit elected

 

 9  to discontinue withholding contributions from employees'

 

10  compensation.

 

11        (4) "Noncontributory service" means credited service rendered

 

12  under the noncontributory plan.

 

13        (5) "Nonteacher" means a person an individual employed by a

 

14  reporting unit who is not a teacher as defined in section 8(4).8.

 

15        Sec. 41. (1) The annual level percentage of payroll

 

16  contribution rates to finance benefits being provided and to be

 

17  provided by the retirement system must be determined by actuarial

 

18  valuation under subsection (2) on the basis of the risk assumptions

 

19  that the retirement board and the department adopt after

 

20  consultation with the state treasurer and an actuary. An annual

 

21  actuarial valuation must be made of the retirement system to

 

22  determine the actuarial condition of the retirement system and the

 

23  required contribution to the retirement system. An annual actuarial

 

24  gain-loss experience study of the retirement system must be made to

 

25  determine the financial effect of variations of actual retirement

 

26  system experience from projected experience.

 

27        (2) Except as otherwise provided in section sections 41a and

 1  41b, the annual contribution rates for benefits is subject to all

 

 2  of the following:

 

 3        (a) Except as otherwise provided in this subdivision, the

 

 4  contribution rate for benefits must be computed using an individual

 

 5  projected benefit entry age normal cost method of valuation. If the

 

 6  contributions described in section 43e are determined by a final

 

 7  order of a court of competent jurisdiction for which all rights of

 

 8  appeal have been exhausted to be unconstitutional and the

 

 9  contributions are not deposited into the appropriate funding

 

10  account referenced in section 43e, the contribution rate for health

 

11  benefits provided under section 91 must be computed using a cash

 

12  disbursement method.

 

13        (b) The Subject to subdivision (c), the contribution rate for

 

14  service likely to be rendered in the current year, the normal cost

 

15  contribution rate, for reporting units must be determined as

 

16  follows:

 

17        (i) Calculate the aggregate amount of individual projected

 

18  benefit entry age normal costs.

 

19        (ii) Divide the result of the calculation under subparagraph

 

20  (i) by 1% of the aggregate amount of active members' valuation

 

21  compensation.

 

22        (c) Except for the employee portion of the normal cost

 

23  contribution rates for members under section 41b(2), beginning with

 

24  the state fiscal year ending September 30, 2018 and for each

 

25  subsequent fiscal year, the normal cost contribution rate must not

 

26  be less than the normal cost contribution rate in the immediately

 

27  preceding state fiscal year.

 1        (d) (c) The Subject to the subdivision (e), the contribution

 

 2  rate for unfunded service rendered before the valuation date, the

 

 3  unfunded actuarial accrued liability contribution rate, must be

 

 4  determined as follows:

 

 5        (i) Calculate the aggregate amount of unfunded actuarial

 

 6  accrued liabilities of reporting units as follows:

 

 7        (A) Calculate the actuarial present value of benefits for

 

 8  members attributable to reporting units.

 

 9        (B) Calculate the actuarial present value of future normal

 

10  cost contributions of reporting units.

 

11        (C) Calculate the actuarial present value of assets on the

 

12  valuation date.

 

13        (D) Add the results of sub-subparagraphs (B) and (C).

 

14        (E) Subtract from the result of the calculation under sub-

 

15  subparagraph (A) the result from the calculation under sub-

 

16  subparagraph (D).

 

17        (ii) Divide the result of the calculation under subparagraph

 

18  (i) by 1% of the actuarial present value over a period not to

 

19  exceed 50 years of projected valuation compensation.

 

20        (e) Except for the employee portion of the unfunded actuarial

 

21  accrued liability contribution rates for members under section

 

22  41b(2), beginning with the state fiscal year ending September 30,

 

23  2018 and for each subsequent fiscal year until the unfunded

 

24  actuarial accrued liability is paid off, the unfunded actuarial

 

25  accrued liability contribution rate must not be less than the

 

26  unfunded actuarial accrued liability contribution rate in the

 

27  immediately preceding state fiscal year.

 1        (f) (d) Beginning with the state fiscal year ending September

 

 2  30, 2013 and for each subsequent fiscal year, the unfunded

 

 3  actuarial accrued liability contribution rate applied to payroll

 

 4  must not exceed 20.96% for a reporting unit that is not a

 

 5  university reporting unit. Any additional unfunded actuarial

 

 6  accrued liability contributions as determined under this section

 

 7  for each fiscal year are to be paid by appropriation from the state

 

 8  school aid fund established by section 11 of article IX of the

 

 9  state constitution of 1963. Except as otherwise provided in this

 

10  section, and section 41a, and section 41b, the unfunded actuarial

 

11  accrued liability contribution rate must be based on and applied to

 

12  the combined payrolls of the employees who are members and or

 

13  qualified participants, or both.

 

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

 

15  2019, and for each subsequent fiscal year, for a reporting unit

 

16  that is not a university reporting unit, tax supported community or

 

17  junior college, public school academy, or district library as

 

18  defined in section 69g, the unfunded actuarial accrued liability

 

19  contribution rate determined under subdivision (d) must be applied

 

20  to the reporting unit's payroll, as adjusted under subdivision (h).

 

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

 

22  2019, the payroll for which the unfunded actuarial accrued

 

23  liability contribution rate is applied for a reporting unit

 

24  described in subdivision (g) must be adjusted by the growth rate of

 

25  the reporting unit's current operating expenditures in the previous

 

26  fiscal year based on methods as determined by the retirement system

 

27  and in consultation with the system's actuary. The adjusted payroll

 1  under this subdivision must become the basis on which the

 

 2  contribution rate provided under subdivision (d) for each

 

 3  subsequent state fiscal year is determined for a reporting unit

 

 4  described in subdivision (g).

 

 5        (i) (e) Beginning with the state fiscal year ending September

 

 6  30, 2016 and for each subsequent state fiscal year, the unfunded

 

 7  actuarial accrued liability contribution rate applied to the

 

 8  combined payroll, as provided in section 41a, must not exceed

 

 9  25.73% for a university reporting unit. Any additional unfunded

 

10  actuarial accrued liability contributions as determined under this

 

11  section for each fiscal year for university reporting units are to

 

12  be paid by appropriation under article III of the state school aid

 

13  act of 1979, 1979 PA 94, MCL 388.1836 to 388.1893.388.1891.

 

14        (3) Before November 1 of each year, the executive secretary of

 

15  the retirement board shall certify to the director of the

 

16  department the aggregate compensation estimated to be paid public

 

17  school employees for the current state fiscal year.

 

18        (4) On the basis of the estimate under subsection (3), the

 

19  annual actuarial valuation, and any adjustment required under

 

20  subsection (6), the director of the department shall compute the

 

21  sum due and payable to the retirement system and shall certify this

 

22  amount to the reporting units.

 

23        (5) The Except as provided in section 41b, the reporting units

 

24  shall pay the amount certified under subsection (4) to the director

 

25  of the department in equal payroll cycle installments for unfunded

 

26  actuarial accrued liability contributions and payroll cycle

 

27  installments for normal cost contributions.

 1        (6) Not later than 90 days after termination of each state

 

 2  fiscal year, the executive secretary of the retirement board shall

 

 3  certify to the director of the department and each reporting unit

 

 4  the actual aggregate compensation paid to public school employees

 

 5  during the preceding state fiscal year. On receipt of that

 

 6  certification, the director of the department may compute any

 

 7  adjustment required to the amount due to a difference between the

 

 8  estimated and the actual aggregate compensation and the estimated

 

 9  and the actual actuarial employer contribution rate. The

 

10  difference, if any, must be paid as provided in subsection (9).

 

11  This subsection does not apply in a fiscal year in which a deposit

 

12  occurs under subsection (14).

 

13        (7) The director of the department may require evidence of

 

14  correctness and may conduct an audit of the aggregate compensation

 

15  that the director of the department considers necessary to

 

16  establish its correctness.

 

17        (8) A reporting unit shall forward employee and employer

 

18  social security contributions and reports as required by the

 

19  federal old-age, survivors, disability, and hospital insurance

 

20  provisions of title II of the social security act, 42 USC 401 to

 

21  434.

 

22        (9) For an employer of an employee of a local public school

 

23  district or an intermediate school district, for differences

 

24  occurring in fiscal years beginning on or after October 1, 1993, a

 

25  minimum of 20% of the difference between the estimated and the

 

26  actual aggregate compensation and the estimated and the actual

 

27  actuarial employer contribution rate described in subsection (6),

 1  if any, must be paid by that employer in the next succeeding state

 

 2  fiscal year and a minimum of 25% of the remaining difference must

 

 3  be paid by that employer in each of the following 4 state fiscal

 

 4  years, or until 100% of the remaining difference is submitted,

 

 5  whichever first occurs. For an employer of other public school

 

 6  employees, for differences occurring in fiscal years beginning on

 

 7  or after October 1, 1991, a minimum of 20% of the difference

 

 8  between the estimated and the actual aggregate compensation and the

 

 9  estimated and the actual actuarial employer contribution rate

 

10  described in subsection (6), if any, must be paid by that employer

 

11  in the next succeeding state fiscal year and a minimum of 25% of

 

12  the remaining difference must be paid by that employer in each of

 

13  the following 4 state fiscal years, or until 100% of the remaining

 

14  difference is submitted, whichever first occurs. In addition,

 

15  interest must be included for each year that a portion of the

 

16  remaining difference is carried forward. The interest rate must

 

17  equal the actuarially assumed rate of investment return for the

 

18  state fiscal year in which payment is made. This subsection does

 

19  not apply in a fiscal year in which a deposit occurs under

 

20  subsection (14).

 

21        (10) Beginning on September 30, 2006, all assets held by the

 

22  retirement system must be reassigned their fair market value, as

 

23  determined by the state treasurer, as of September 30, 2006, and in

 

24  calculating any unfunded actuarial accrued liabilities, any market

 

25  gains or losses incurred before September 30, 2006 may not be

 

26  considered by the retirement system's actuaries.

 

27        (11) Except as otherwise provided in this subsection,

 1  beginning on September 30, 2006, the actuary used by the retirement

 

 2  board shall assume a rate of return on investments of 8.00% 8% per

 

 3  annum, as of September 30, 2006, which rate may only be changed

 

 4  with the approval of the retirement board and the director of the

 

 5  department. Beginning on July 1, 2010, the actuary used by the

 

 6  retirement board shall assume a rate of return on investments of

 

 7  7.00% 7% per annum for investments associated with members who

 

 8  first became members after June 30, 2010, and before February 1,

 

 9  2018, which rate may only be changed with the approval of the

 

10  retirement board and the director of the department. Beginning on

 

11  February 1, 2018, the actuary used by the retirement board shall

 

12  assume a rate of return on investments of 6% per annum for

 

13  investments associated with members who first became a member on or

 

14  after February 1, 2018, which rate may only be changed with the

 

15  approval of the retirement board and the director of the

 

16  department.

 

17        (12) Beginning on September 30, 2006, the value of assets used

 

18  must be based on a method that spreads over a 5-year period the

 

19  difference between actual and expected return occurring in each

 

20  year after September 30, 2006, and the methodology may only be

 

21  changed with the approval of the retirement board and the director

 

22  of the department.

 

23        (13) Beginning on September 30, 2006, the actuary used by the

 

24  retirement board shall use a salary increase assumption that

 

25  projects annual salary increases of 4%. In addition to the 4%, the

 

26  retirement board shall use an additional percentage based on an

 

27  age-related scale to reflect merit, longevity, and promotional

 1  salary increase. The actuary shall use this assumption until a

 

 2  change in the assumption is approved in writing by the retirement

 

 3  board and the director of the department.

 

 4        (14) For fiscal years that begin on or after October 1, 2001,

 

 5  if the actuarial valuation prepared under this section demonstrates

 

 6  that as of the beginning of a fiscal year, and after all credits

 

 7  and transfers required by this act for the previous fiscal year

 

 8  have been made, the sum of the actuarial value of assets and the

 

 9  actuarial present value of future normal cost contributions exceeds

 

10  the actuarial present value of benefits, the amount based on the

 

11  annual level percent of payroll contribution rate under subsections

 

12  (1) and (2) may be deposited into the health advance funding

 

13  subaccount created by section 34.

 

14        (15) Notwithstanding any other provision of this act, if the

 

15  retirement board establishes an arrangement and fund as described

 

16  in section 6 of the public employee retirement benefit protection

 

17  act, 2002 PA 100, MCL 38.1686, the benefits that are required to be

 

18  paid from that fund must be paid from a portion of the employer

 

19  contributions described in this section or other eligible funds.

 

20  The retirement board shall determine the amount of the employer

 

21  contributions or other eligible funds that must be allocated to

 

22  that fund and deposit that amount in that fund before it deposits

 

23  any remaining employer contributions or other eligible funds in the

 

24  pension fund.

 

25        (16) The retirement board and the department shall conduct and

 

26  review an experience investigation study and adopt risk assumptions

 

27  on which actuarial valuations are to be based after consultation

 1  with the actuary and the state treasurer. The experience

 

 2  investigation study shall be completed and risk assumptions shall

 

 3  be periodically reviewed at least once every 5 years.

 

 4        (17) Every April 1 following the periodic review of risk

 

 5  assumptions under subsection (16), the office of retirement

 

 6  services on behalf of the department and the state treasurer shall

 

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

 

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

 

 9  representatives appropriations committees, and the senate and house

 

10  fiscal agencies. A report required under this subsection must be

 

11  published on the office of retirement services' website and include

 

12  at least all of the following:

 

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

 

14  following probability levels:

 

15        (i) 5%.

 

16        (ii) 25%.

 

17        (iii) 50%

 

18        (iv) 75%.

 

19        (v) 95%.

 

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

 

21  20-year time intervals.

 

22        (c) Mortality assumptions.

 

23        (d) Retirement age assumptions.

 

24        (e) Payroll growth assumptions.

 

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

 

26  financial status of the retirement system.

 

27        (18) (16) As used in this section: , "university

 1        (a) "Current operating expenditures" includes functions 1xx,

 

 2  2xx, 45x, and all object codes except 6xxx, as defined in the most

 

 3  recent "Michigan Public School Accounting Manual Bulletin 1022" as

 

 4  of the effective date of the amendatory act that added this

 

 5  subdivision, and is equal to the total of instructional and support

 

 6  services expenditures, including the total general fund charges

 

 7  incurred in the general, special education, and vocational

 

 8  education funds for the benefit of the current fiscal year, whether

 

 9  paid or unpaid, and all expenditures of the instructional programs

 

10  plus applicable supporting service costs reduced by capital outlay,

 

11  debt service, community services, and outgoing transfers and other

 

12  transactions. Current operating expenditures also include operating

 

13  funds for any public school or other public educational entity

 

14  first authorized or established by a reporting unit described in

 

15  subsection (2)(g) on or after the effective date of the amendatory

 

16  act that added this subdivision.

 

17        (b) "University reporting unit" means a reporting unit that is

 

18  a university listed in the definition of public school employee

 

19  under section 6.

 

20        Sec. 41b. (1) Beginning July 1, 2010, the retirement system

 

21  may determine a separate employer contribution rate for members who

 

22  first became a member members on or after July 1, 2010 and before

 

23  February 1, 2018. Except as provided in this section, the

 

24  retirement system shall determine the separate employer

 

25  contribution rate in the manner prescribed in section 41.

 

26        (2) Beginning February 1, 2018, the retirement system shall

 

27  determine a separate contribution rate for members who first became

 1  members on or after February 1, 2018. Except as provided in this

 

 2  section, the retirement system shall determine the separate

 

 3  contribution rate in the manner prescribed in section 41, except

 

 4  that any increase or decrease in the unfunded actuarial accrued

 

 5  liabilities associated with members who first became members on or

 

 6  after February 1, 2018 must be amortized on a 10-year level-dollar

 

 7  schedule with a new contribution rate calculated for each year.

 

 8        (3) All normal cost and any unfunded actuarial accrued

 

 9  liability contributions as determined under subsection (2) must be

 

10  paid on a cost-sharing basis of 50% by the employer and 50% by the

 

11  employee. Except as provided in this section, contributions shall

 

12  be made in the manner prescribed in section 42. An employee

 

13  contribution for unfunded actuarial accrued liability must not be

 

14  assessed to an employee based on any portion of an unfunded

 

15  liability caused by the failure of an employer to make a required

 

16  contribution. Following the determination of the cost-sharing basis

 

17  under this subsection, section 41(2)(c) and (e) applies.

 

18        (4) The contributions of a member for unfunded actuarial

 

19  accrued liability must be treated as picked-up contributions under

 

20  the internal revenue code, deducted by the employer, and remitted

 

21  as employer contributions to the general fund of the retirement

 

22  system and must only be used to finance unfunded actuarial accrued

 

23  liabilities of the retirement system.

 

24        (5) (2) To the extent and upon approval by the internal

 

25  revenue service, Internal Revenue Service, the retirement system

 

26  for the Tier 1 plan and the plan administrator for the Tier 2 plan

 

27  may also determine the extent to which some or all of the

 1  individuals performing services for an entity not participating in

 

 2  the retirement system that receives any funding from the state

 

 3  school aid fund established in section 11 of article IX of the

 

 4  state constitution of 1963 may participate in the Tier 1 and Tier 2

 

 5  plans.

 

 6        Sec. 42. (1) Beginning with the 1994-95 state fiscal year

 

 7  ending September 30, 1995 and subject to section 41b, a reporting

 

 8  unit shall contribute the entire amount determined under section 41

 

 9  to the reserve for employer contributions and to the reserve for

 

10  health benefits. The reporting unit contribution under this

 

11  subsection is the exclusive obligation of the reporting unit

 

12  payable out of general budget resources of the reporting unit,

 

13  including funds available under local millage and other local

 

14  resources and from the state school aid allocation to the reporting

 

15  unit, and shall is not be a separate obligation by specific

 

16  reimbursement or otherwise of this state.

 

17        (2) As authorized by resolution or other enabling act of its

 

18  governing body, the employer shall pick up all contributions of a

 

19  member made pursuant to under section 43a for all compensation paid

 

20  on or after January 1, 1987 December 31, 1986 and reported to the

 

21  retirement system. Although considered contributions of a member

 

22  for certain purposes under this act, all contributions picked up

 

23  shall must be treated as paid by the employer in lieu of

 

24  contributions by the employee. Contributions picked up as provided

 

25  in this subsection shall must be paid from the same source of funds

 

26  that is used for paying compensation to the member. The employer

 

27  may pick up these contributions by either a reduction to the

 1  member's cash salary, an offset against a future salary increase,

 

 2  or a combination of a reduction in salary and offset against a

 

 3  future salary increase. This subsection does not apply, and the

 

 4  employer shall not deduct, offset, or remit contributions, until

 

 5  the department receives notification from the United States

 

 6  internal revenue service Internal Revenue Service that

 

 7  contributions picked up shall will not be included as gross income

 

 8  of the member until they are distributed or made available to the

 

 9  member, retirant, retirement allowance beneficiary, or refund

 

10  beneficiary.

 

11        (3) The employer shall deduct from a member's compensation the

 

12  contributions for social security provided in 1951 PA 205, MCL

 

13  38.851 to 38.871. Contributions shall must be made while the member

 

14  remains a public school employee. Each reporting unit official

 

15  shall deduct the social security contributions from the

 

16  compensation of each member for each payroll period after the date

 

17  the employee becomes a member. Social security contributions shall

 

18  must be made notwithstanding that the minimum compensation provided

 

19  by law is changed. Each member is considered to have agreed to the

 

20  contributions prescribed in this subsection.

 

21        (4) Each reporting unit official shall forward member

 

22  contributions to the retirement system on a schedule and in a

 

23  manner determined by the retirement system.

 

24        (5) Each reporting unit official shall forward the entire

 

25  employer contribution required by this act to the retirement system

 

26  on a schedule and in a manner determined by the retirement system.

 

27        (6) Each reporting unit official shall submit to the

 1  retirement system a report that includes the information for

 

 2  retirement purposes, including, but not limited to, persons

 

 3  employed, retirants performing services at a reporting unit who are

 

 4  employed by an entity other than the reporting unit or who are

 

 5  independent contractors, wages or amounts paid, hours, and

 

 6  contributions required under this act. The report shall contain

 

 7  must include the information on a pay period basis and shall must

 

 8  be submitted to the retirement system on a schedule and in a manner

 

 9  determined by the retirement system. The superintendent for a

 

10  reporting unit or the chief administrator for a reporting unit that

 

11  does not have a superintendent shall complete an annual

 

12  certification that gives authorization for the employees of the

 

13  reporting unit to report the information to the retirement system.

 

14        (7) If a reporting unit fails to submit a report or

 

15  contributions, or both, according to the schedule established by

 

16  the retirement board, a late fee shall be paid by the reporting

 

17  unit shall pay a late fee. If the remittance of contributions is

 

18  late, the late fee shall must include interest for each day that

 

19  the remittance of contributions is late. The retirement board

 

20  periodically may establish the late fee, which shall must not be

 

21  less than $25.00, and interest charges, which shall must not be

 

22  less than 6% per annum. If a reporting unit fails to correct errors

 

23  on a report before the errors are discovered by the retirement

 

24  system or if such the errors are intentional, the reporting unit

 

25  shall pay the late fee and interest charges as described in this

 

26  subsection for each day that the report is in error, unless

 

27  reasonable cause is shown to the satisfaction of the retirement

 1  system.

 

 2        (8) Upon On written notice from the retirement board, the

 

 3  superintendent of public instruction and the state treasurer shall

 

 4  withhold payment of state funds, in part or in whole, payable from

 

 5  the state school aid appropriation or higher education

 

 6  appropriations to a reporting unit that fails to comply with this

 

 7  section.

 

 8        Sec. 43a. (1) The contributions of a member who contributes to

 

 9  the member investment plan shall must be deducted by the employer

 

10  and remitted as employer contributions to the retirement system

 

11  pursuant to section 42. A member who contributes to the member

 

12  investment plan is entitled to the benefits provided in sections

 

13  43b and 43c.

 

14        (2) Except as otherwise provided in subsection (7), a member

 

15  who first became a member on or before December 31, 1989 and who

 

16  elected or elects on or before December 31, 1989 to contribute to

 

17  the member investment plan shall contribute 3.9% of the member's

 

18  compensation to the member investment plan.

 

19        (3) Except as otherwise provided in subsection (7), a member

 

20  who first became a member on or before December 31, 1986 but did

 

21  not perform membership service between December 31, 1986 and

 

22  January 1, 1990, and who returns to membership service on or after

 

23  January 1, 1990 and before July 1, 2008, shall make the

 

24  contributions described in subsection (5).

 

25        (4) Except as otherwise provided in subsection (7), a member

 

26  who first became a member on or after January 1, 1990 and before

 

27  July 1, 2008 shall make the contributions described in subsection

 1  (5).

 

 2        (5) Except as otherwise provided in subsection (7), a member

 

 3  who first became a member on or after January 1, 1990 and before

 

 4  July 1, 2008 shall contribute the following amounts to the member

 

 5  investment plan:

 

 

6	Member's annual school fiscal	Amount payable to the member
7	year earned compensation	investment plan
8	Not over $5,000.00	3% of member's compensation
9	Over $5,000.00 but not over	$150.00, plus 3.6% of the
10	$15,000.00	excess over $5,000.00
11	Over $15,000.00	$510.00, plus 4.3% of the
12		excess over $15,000.00

 

 

13        (6) Except as otherwise provided in subsection (7), a member

 

14  who first became a member on or after July 1, 2008 and before

 

15  February 1, 2018 shall contribute the following amounts to the

 

16  member investment plan:

 

 

17	Member's annual school	Amount payable to the member
18	fiscal year earned compensation	investment plan
19	Not over $5,000.00	3% of member's compensation
20	Over $5,000.00 but not over	$150.00, plus 3.6% of excess
21	$15,000.00	over $5,000.00
22	Over $15,000.00	$510.00, plus 6.4% of the
23		excess over $15,000.00

 

 

24        (7) Beginning on the transition date, a member described in

 

25  subsections (2) to (6) who makes the election under section 59(1)

 

26  and who does not make the attainment date designation under section

 

27  59(1) shall contribute the percentage of the member's annual school

 1  fiscal year earned compensation to the retirement system as

 

 2  prescribed in section 43g until termination of employment.

 

 3  Beginning on the transition date, a member described in subsections

 

 4  (2) to (6) who makes the election and attainment date designation

 

 5  under section 59(1) shall contribute the percentage of the member's

 

 6  annual school fiscal year earned compensation to the retirement

 

 7  system as prescribed in section 43g until his or her attainment

 

 8  date and shall contribute the percentage of the member's annual

 

 9  school fiscal year earned compensation to the retirement system as

 

10  prescribed in this section on and after his or her attainment date

 

11  until termination of employment. Beginning on the transition date,

 

12  a member described in subsections (2) to (6) who makes or is

 

13  considered to have made the alternative election under section

 

14  59(2)(a) shall continue to contribute the percentage of the

 

15  member's annual school fiscal year earned compensation to the

 

16  retirement system as prescribed in this section until termination

 

17  of employment. Beginning on the transition date, a member described

 

18  in subsections (2) to (6) who makes the alternative election under

 

19  section 59(2)(b) shall not contribute any percentage of the

 

20  member's annual school fiscal year earned compensation to the

 

21  retirement system under this section or section 43g.

 

22        (8) A member who first became a member on or after February 1,

 

23  2018 shall contribute his or her normal cost contribution amounts

 

24  to the member investment plan as described in section 41b(3).

 

25        Sec. 69. (1) As Until September 29, 2017 at 5 p.m. Eastern

 

26  Daylight Saving Time, as a condition for granting membership or

 

27  prior service credit under this act for out of system public

 1  education service, a member shall pay meet both of the following

 

 2  requirements:

 

 3        (a) Pay to the retirement system an amount equal to the amount

 

 4  the member would have contributed pursuant to under the schedule

 

 5  governing member contributions in effect at the time of that

 

 6  service had the service been performed under this act or former Act

 

 7  No. 136 of the Public Acts of 1945 PA 136, together with regular

 

 8  interest from the end of the school fiscal year in which service

 

 9  was performed to the semiannual anniversary of the date following

 

10  the payment. , and shall have

 

11        (b) Have 5 years of reporting unit service credit under this

 

12  act or former Act No. 136 of the Public Acts of 1945 PA 136,

 

13  following the out of system public education service.

 

14        (2) A member shall is not be entitled to a retirement

 

15  allowance based on out of system public education service that was

 

16  performed after July 1, 1974, until unless the member pays into the

 

17  retirement system for that meets both of the following

 

18  requirements:

 

19        (a) Before September 29, 2017 at 5 p.m. Eastern Daylight

 

20  Saving Time, initiates a service credit purchase for that service

 

21  in an amount equal to 5% of the member's full-time or equated full-

 

22  time compensation earned in the school fiscal year before the

 

23  school fiscal year in which the application to purchase and payment

 

24  for the service credit is made, multiplied by the years of that

 

25  service the member elects to purchase. and unless that

 

26        (b) That service is followed by 5 years of reporting unit

 

27  service credit under this act.

 1        (3) For the purposes of computing payment under this section,

 

 2  the compensation amount used shall must not be less than the

 

 3  highest school fiscal year compensation previously earned by the

 

 4  member. If the compensation amount used for computing payment under

 

 5  this section exceeds the member's final average compensation

 

 6  determined at the time of retirement, the payment required under

 

 7  this section shall must be recomputed using the member's final

 

 8  average compensation and a refund shall must be made based upon on

 

 9  the recomputation. Credit provided by this section shall must not

 

10  be used in satisfying the minimum of 10 years of service credit

 

11  required under this act for a retirement allowance. A person who

 

12  had employment with a community mental health service program as

 

13  described in section 6(2) shall is not be subject to the minimum of

 

14  10 years of service credit, if the other requirements of this

 

15  section are met.

 

16        (4) A member shall must not receive more than 15 years of out

 

17  of system public education service. A member shall must not receive

 

18  more out of system public education service than service performed

 

19  under this act or former Act No. 136 of the Public Acts of 1945 PA

 

20  136, unless, before July 1, 1974, the member applied for out of

 

21  system public education service credit based upon on payment of

 

22  contributions for that service credit as required under former Act

 

23  No. 136 of the Public Acts of 1945 PA 136. The total out of system

 

24  public education service credited shall must be used to compute the

 

25  member's retirement allowance if the minimum service requirements

 

26  performed under this act or former Act No. 136 of the Public Acts

 

27  of 1945 PA 136 are met.

 1        (5) If a member who made payment for out of system public

 

 2  education service dies and a retirement allowance beneficiary has

 

 3  not been designated, or if the member withdraws from service before

 

 4  his or her retirement becomes effective, the payment made by the

 

 5  member shall under this section must be refunded to the member or

 

 6  to the member's refund beneficiary upon on request.

 

 7        (6) Out of system public education service shall is not be

 

 8  creditable toward retirement under this act if the member is or

 

 9  will be receiving a retirement allowance for the same service from

 

10  another retirement system.

 

11        (7) Out of system public education service shall is not be

 

12  creditable under this act unless similar service performed in a

 

13  reporting unit would be creditable.

 

14        (8) Before January 31, 1991, a member may elect to purchase

 

15  service credit as an elementary or secondary teacher at a United

 

16  States armed forces military base in the United States or a foreign

 

17  country upon payment to the retirement board of the actuarial

 

18  cost.After September 29, 2017 at 5 p.m. Eastern Daylight Saving

 

19  Time, a member is not eligible to initiate service credit purchase

 

20  under this section.

 

21        Sec. 69c. (1) A Until September 29, 2017 at 5 p.m. Eastern

 

22  Daylight Saving Time, a member may elect to purchase service credit

 

23  for service performed as an employee in a nonpublic elementary or

 

24  secondary educational institution or a nonpublic 2- or 4-year

 

25  institution of higher education in this state, in other states of

 

26  the United States, or in the territorial possessions of the United

 

27  States upon on request and presentation of documentation of the

 1  employment rendered that is verifiable from official employment or

 

 2  payroll records or other acceptable documentation as determined by

 

 3  the retirement board, and upon on payment to the retirement system

 

 4  of the actuarial cost.

 

 5        (2) Before January 31, 1991, a member may elect to purchase

 

 6  service credit for service performed as an employee in a foreign

 

 7  country at a school for United States personnel or dependents of

 

 8  the United States military or United States department of state

 

 9  personnel; service performed as a full-time teacher with the job

 

10  corps created pursuant to section 422 of part B of title IV of the

 

11  job training partnership act, Public Law 97-300, 29 U.S.C. 1692;

 

12  service performed as a teacher in a trust territory or former trust

 

13  territory of the United States; or service performed as a teacher

 

14  on an Indian reservation in this country; upon on request and

 

15  presentation of documentation of the employment rendered that is

 

16  verifiable from official employment or payroll records or other

 

17  acceptable documentation as determined by the retirement board, and

 

18  upon on payment to the retirement system of the actuarial cost.

 

19        (3) Service shall must not be credited under this section

 

20  unless the service being purchased is followed by at least 5 years

 

21  of reporting unit service credit under this act or former Act No.

 

22  136 of the Public Acts of 1945 PA 136. Service purchased under this

 

23  section shall must not be used to satisfy the minimum of 10 years

 

24  of service credit required to receive a retirement allowance under

 

25  this act. The total service credited under subsections (1) and (2)

 

26  shall must not exceed 5 years.

 

27        (4) If a member who made payment for service under this

 1  section dies and a retirement allowance beneficiary has not been

 

 2  designated, or if the member withdraws from service before his or

 

 3  her retirement becomes effective, the payment made by the member

 

 4  shall must be refunded to the member or to the member's refund

 

 5  beneficiary upon on request.

 

 6        (5) Service shall must not be credited under this section if

 

 7  the member is or will be receiving a pension or annuity for the

 

 8  same service from another retirement system.

 

 9        (6) A person who became a retirant with a retirement allowance

 

10  effective date on or after January 1, 1988 and on or before

 

11  December 21, 1988 shall be entitled to purchase service credit for

 

12  service performed as an employee in a nonpublic elementary or

 

13  secondary educational institution or a nonpublic 2- or 4-year

 

14  institution of higher education as provided by this section.

 

15  Service credit purchased pursuant to this subsection shall be

 

16  purchased before July 1, 1989, or the expiration of 6 months after

 

17  December 21, 1988, whichever is later. The monthly retirement

 

18  allowance of a retirant entitled to purchase service credit under

 

19  this subsection shall be recomputed based upon the additional

 

20  service credit. The recomputed monthly amount shall be payable

 

21  beginning on the first day of the month following the month in

 

22  which payment is received by the retirement system.

 

23        (6) After September 29, 2017 at 5 p.m. Eastern Daylight Saving

 

24  Time, a member is not eligible to initiate a service credit

 

25  purchase under this section.

 

26        (7) As used in this section:

 

27        (a) "Nonpublic elementary or secondary educational

 1  institution" means an institution that offers or provides an

 

 2  organized course of academic study primarily oriented toward the

 

 3  awarding of high school diplomas. Nonpublic elementary or secondary

 

 4  educational institution does not include a proprietary school.

 

 5        (b) "Nonpublic 2- or 4-year institution of higher education"

 

 6  means an institution that offers an organized course of academic

 

 7  study primarily oriented toward the awarding of associate,

 

 8  baccalaureate, master's, doctoral, or other academic degrees.

 

 9  Nonpublic 2- or 4-year institution of higher education does not

 

10  include a proprietary school.

 

11        (c) "Proprietary school" means a school that uses a certain

 

12  plan or method to teach a trade, occupation, or vocation for a

 

13  consideration, reward, or promise. Proprietary school includes, but

 

14  is not limited to, a private business, trade, or home study school.

 

15        Sec. 69f. (1) A Until September 29, 2017 at 5 p.m. Eastern

 

16  Daylight Saving Time, a member may elect to purchase not more than

 

17  5 years of service credit less the number of years of service

 

18  credit purchased under sections 6(2)(c), (d), (e), and (f), 64(3),

 

19  (4), and (5), 69a, 69b, and 69c(2), 69d, 69e, 74a, 74b, 77, and 78,

 

20  upon or former sections 69a, 69b, 69d, 69e, 74a, 74b, 77, and 78,

 

21  on request and payment to the retirement system of the actuarial

 

22  cost.

 

23        (2) Service credit purchased under this section may must not

 

24  be used to satisfy the minimum of 10 years of service credit

 

25  required to receive a retirement allowance under this act.

 

26        (3) Service credit purchased under this section shall must not

 

27  be used to satisfy the service credit requirement set forth in

 1  section 81(1)(a) for a retirement allowance paid prior to before

 

 2  age 46 as provided by section 43b(a).

 

 3        (4) If a member who made payment for service under this

 

 4  section dies and a retirement allowance is not payable, or if the

 

 5  member withdraws from service and a retirement allowance is not

 

 6  payable, the payment made by the member shall must be refunded to

 

 7  the member or to the member's refund beneficiary upon request.

 

 8        (5) After September 29, 2017 at 5 p.m. Eastern Daylight Saving

 

 9  Time, a member is not eligible to initiate a service credit

 

10  purchase under this section.

 

11        Sec. 70. (1) As Until September 29, 2017 at 5 p.m. Eastern

 

12  Daylight Saving Time, as a condition for granting membership or

 

13  prior service credit under this act for state of Michigan service,

 

14  a member shall pay meet both of the following requirements:

 

15        (a) Pay to the retirement system an amount equal to the amount

 

16  the member would have contributed under the contributory plan for

 

17  service performed before July 1, 1977 pursuant to under the

 

18  schedule governing member contributions in effect at the time of

 

19  that service had the service been performed under this act or

 

20  former Act No. 136 of the Public Acts of 1945 PA 136, together with

 

21  regular interest from the end of the school fiscal year in which

 

22  the service was performed to the semiannual anniversary of the date

 

23  following payment. , and shall relinquish

 

24        (b) Relinquish all rights to retirement under the state

 

25  employees' retirement act, Act No. 240 of the Public Acts of 1943,

 

26  as amended, being sections 38.1 to 38.47 of the Michigan Compiled

 

27  Laws. A 1943 PA 240, MCL 38.1 to 38.69. Until September 29, 2017 at

 1  5 p.m. Eastern Daylight Saving Time, a member shall not is entitled

 

 2  to receive benefits pursuant to under sections 43b and 43c for

 

 3  service performed on or after January 1, 1987 until if the member

 

 4  pays the difference between the actuarial equivalent of the

 

 5  benefits provided by sections 43b and 43c and by the state

 

 6  employees' retirement act, Act No. 240 of the Public Acts of

 

 7  1943.1943 PA 240, MCL 38.1 to 38.69.

 

 8        (2) Credit for service performed as a state employee under the

 

 9  state employees' retirement act, Act No. 240 of the Public Acts of

 

10  1943, as amended, shall 1943 PA 240, MCL 38.1 to 38.69, must be on

 

11  the same basis for eligibility in all respects , for any form of

 

12  retirement provided in this act as if the service were performed in

 

13  a reporting unit under this act.

 

14        (3) A Until September 29, 2017 at 5 p.m. Eastern Daylight

 

15  Saving Time, a former member who on or before July 1, 1974, was

 

16  employed in the state classified or unclassified service, whose

 

17  membership was transferred to the state employees' retirement

 

18  system under the state employees' retirement act, Act No. 240 of

 

19  the Public Acts of 1943, as amended, 1943 PA 240, MCL 38.1 to

 

20  38.69, and who again became a member of the retirement system

 

21  created under former Act No. 136 of the Public Acts of 1945 PA 136

 

22  or becomes a member of the retirement system created under this

 

23  act, shall be is entitled to petition the retirement system in

 

24  writing for a transfer of the member's accumulated contributions,

 

25  including interest, and service standing to the member's credit

 

26  with the state employees' retirement system to this retirement

 

27  system. Upon On receipt of the member's petition, service standing

 1  to the member's credit, accumulated contributions, and interest

 

 2  shall must be transferred from the employee's savings fund created

 

 3  under the state employees' retirement act, Act No. 240 of the

 

 4  Public Acts of 1943, as amended, 1943 PA 240, MCL 38.1 to 38.69, to

 

 5  the reserve for employee contributions of this retirement system. A

 

 6  person An individual whose membership service and accumulated

 

 7  contributions are transferred back to this retirement system

 

 8  immediately shall have the transferred service credit recognized by

 

 9  the retirement system on the same basis as if the person individual

 

10  continuously had been a member of the retirement system.

 

11        (4) If a member who made payment for state of Michigan service

 

12  dies and a retirement allowance beneficiary has not been

 

13  designated, or withdraws from service before his or her retirement

 

14  becomes effective, the payment made by the member shall must be

 

15  refunded to the member or to the member's refund beneficiary upon

 

16  on request.

 

17        (5) After September 29, 2017 at 5 p.m. Eastern Daylight Saving

 

18  Time, a member is not eligible to initiate a service credit

 

19  purchase under this section.

 

20        Sec. 71. (1) The Until September 29, 2017 at 5 p.m. Eastern

 

21  Daylight Saving Time, the retirement board shall grant service

 

22  credit for the time a member is on a sabbatical leave authorized by

 

23  a reporting unit, if the member returns to regular employment with

 

24  the same reporting unit and acquires 1 year or more of subsequent

 

25  service credit with that same reporting unit and if the member

 

26  acquired 5 or more years of credited service with the reporting

 

27  unit immediately before the sabbatical leave.

 1        (2) If the sabbatical leave described in subsection (1) is

 

 2  granted before July 1, 1981, the reporting unit, if the reporting

 

 3  unit had a noncontributory plan at the time the sabbatical leave is

 

 4  granted, or the member, if the reporting unit has a contributory

 

 5  plan at the time the sabbatical leave is granted, shall pay to the

 

 6  system for each year of sabbatical leave credit an amount equal to

 

 7  5% of the member's compensation earned in the school fiscal year

 

 8  immediately before the school fiscal year in which the sabbatical

 

 9  leave is granted, together with regular interest from the end of

 

10  the school fiscal year in which the sabbatical leave was or is

 

11  granted to the earlier of the following dates following the date of

 

12  payment, the first day of the school fiscal year beginning after

 

13  the date of payment or the first day of the seventh month of the

 

14  school fiscal year in which the payment is made. If the reporting

 

15  unit makes the payment required by this subsection, the reporting

 

16  unit also shall pay the required interest. If the member makes the

 

17  payment required by this subsection, the member also shall pay the

 

18  required interest.

 

19        (3) If the sabbatical leave described in subsection (1) is

 

20  granted after June 30, 1981, the member shall pay an amount equal

 

21  to 5% of the member's full-time or equated full-time compensation

 

22  earned in the school fiscal year immediately before the school

 

23  fiscal year in which payment is made for each year of service

 

24  credit the member elects to purchase. In computing payment under

 

25  this subsection, the compensation amount used, except as otherwise

 

26  provided in this subsection, shall must not be less than the

 

27  highest school fiscal year compensation the member earned from the

 1  reporting unit that granted the sabbatical leave. If the

 

 2  compensation amount used for computing payment under this

 

 3  subsection exceeds the member's final average compensation

 

 4  determined at the time of retirement, the payment required under

 

 5  this subsection shall must be recomputed using the member's final

 

 6  average compensation and a refund shall must be made based upon on

 

 7  the recomputation.

 

 8        (4) If, before October 31, 1980, either the reporting unit or

 

 9  the member has contributed 5% of the member's compensation for the

 

10  school fiscal year in which the sabbatical leave was granted in

 

11  order to purchase service credit for that sabbatical leave, a

 

12  further payment for the purchase of service credit for that

 

13  sabbatical leave shall not be required. If a member has paid the

 

14  amount required under subsection (2) for the purchase of service

 

15  credit for sabbatical leave, but later receives a refund of that

 

16  amount, the member, not the reporting unit, shall repay the amount

 

17  with regular interest as required by subsection (2) if the member

 

18  elects to purchase service credit for the sabbatical leave.

 

19        (5) Effective October 1, 1981, the retirement board shall

 

20  grant service credit for the time a member is on either an employee

 

21  organization professional services leave or employee organization

 

22  professional services released time authorized by a reporting unit

 

23  if all of the following conditions are satisfied, as applicable:

 

24        (a) For a member who is on either a professional services

 

25  leave or professional services released time that first began

 

26  before October 1, 1996, which leave or released time is renewed

 

27  annually by the reporting unit, the member is included on the

 1  reporting unit's reports required by section 42(6) and

 

 2  compensation, service, contribution, and other requirements are

 

 3  reported on the same basis as for those members of the reporting

 

 4  unit who were not granted an employee organization professional

 

 5  services leave or employee organization professional services

 

 6  released time.

 

 7        (b) For a member who is on either a professional services

 

 8  leave or professional services released time, which leave or

 

 9  released time does not meet the requirements of subdivision (a),

 

10  the member is included on the reporting unit's reports in the

 

11  manner required by subdivision (a), except that compensation is

 

12  reported at the rate of compensation paid to the member by the

 

13  reporting unit immediately preceding the date the member commenced

 

14  the professional services leave or professional services released

 

15  time along with the normal and customary compensation increases

 

16  that would have been paid to the member by the reporting unit had

 

17  the member remained in the same position held at the reporting unit

 

18  immediately preceding the date the member commenced the leave or

 

19  released time. However, if the member was not working a full 12-

 

20  month period for the reporting unit immediately preceding the date

 

21  the member commenced the professional services leave or

 

22  professional services released time and is working a full 12-month

 

23  period for the public school employee organization, the rate of

 

24  compensation paid to the member by the reporting unit immediately

 

25  preceding the date the member commenced the leave or released time

 

26  may be increased proportionately to reflect the additional time

 

27  worked for the public school employee organization. That adjusted

 1  compensation, along with the normal and customary compensation

 

 2  increases otherwise allowed in this subdivision, shall must then be

 

 3  reported as required in this subdivision.

 

 4        (c) For a member who is on either a professional services

 

 5  leave or professional services released time that first began

 

 6  before October 1, 1996, which leave or released time is renewed

 

 7  annually by the reporting unit, the reporting unit remits the

 

 8  amount required by section 42 and the percentage of aggregate

 

 9  annual compensation provided from the state school aid fund for

 

10  current service, if any, the percentage determined for unfunded

 

11  accrued service as required by section 41, and the employer's share

 

12  of social security contributions if the reporting unit is

 

13  responsible for remitting the employee's share of social security

 

14  contributions.

 

15        (d) For a member who is on either a professional services

 

16  leave or professional services released time, which professional

 

17  services leave or professional services released time does not meet

 

18  the requirements of subdivision (c), the reporting unit remits the

 

19  amounts required by subdivision (c) based upon on the rate of

 

20  compensation paid to the member by the reporting unit immediately

 

21  preceding the date the member commenced the professional services

 

22  leave or professional services released time along with the normal

 

23  and customary compensation increases that would have been paid to

 

24  the member by the reporting unit had the member remained in the

 

25  same position held at the reporting unit immediately preceding the

 

26  date the member commenced the leave or released time. However, if

 

27  the member was not working a full 12-month period for the reporting

 1  unit immediately preceding the date the member commenced the

 

 2  professional services leave or professional services released time

 

 3  and is working a full 12-month period for the public school

 

 4  employee organization, the rate of compensation paid to the member

 

 5  by the reporting unit immediately preceding the date the member

 

 6  commenced the leave or released time may be increased

 

 7  proportionately to reflect the additional time worked for the

 

 8  public school employee organization. That adjusted compensation,

 

 9  along with the normal and customary compensation increases

 

10  otherwise allowed in this subdivision, shall must then be reported

 

11  as required in this subdivision.

 

12        (6) The reporting unit shall must be reimbursed those sums

 

13  paid to the retirement board pursuant to under subsection (5) by

 

14  the member or the public school employee organization on a current

 

15  basis. A member who has credited service as an employee of a school

 

16  district of the first class, as described in part 6 of the revised

 

17  school code, Act No. 451 of the Public Acts of 1976, being sections

 

18  380.401 to 380.485 of the Michigan Compiled Laws, 1976 PA 451, MCL

 

19  380.401 to 380.485, for a leave of absence effective before October

 

20  1, 1981, shall continue to receive credit based upon the provisions

 

21  of on the law of this state in effect at the time the leave of

 

22  absence was initially effective.

 

23        (7) After September 29, 2017 at 5 p.m. Eastern Daylight Saving

 

24  Time, a member is not eligible to initiate a service credit

 

25  purchase under subsections (1) and (3).

 

26        Sec. 75. (1) A Until September 29, 2017 at 5 p.m. Eastern

 

27  Daylight Saving Time, a member who left or leaves service as a

 1  public school employee; who left or leaves out-of-system public

 

 2  education service; or a member of the state employees' retirement

 

 3  system under section 13 of the state employees' retirement act,

 

 4  1943 PA 240, MCL 38.13, who left or leaves service as a state

 

 5  employee for purposes of parental leave who subsequently becomes a

 

 6  member of this retirement system without other intervening

 

 7  employment of more than 20 hours per week for each week for which

 

 8  service credit was claimed may purchase service credit for the time

 

 9  period or periods during which the person was separated from

 

10  service because of parental leave if the member satisfies the

 

11  requirements of this section. The member shall submit an

 

12  application as described in subsection (5) and shall pay the

 

13  actuarial cost to the retirement system. The total service credited

 

14  under this section shall must not exceed 5 years. A member

 

15  requesting purchase of service credit under this section shall

 

16  certify to the retirement system the purpose for which the member

 

17  took leave or was separated from service as a public school

 

18  employee; a person performing out-of-system public education

 

19  service; or a member of the state employees' retirement system

 

20  under section 13 of the state employees' retirement act, 1943 PA

 

21  240, MCL 38.13.

 

22        (2) Service credit purchased under this section may must not

 

23  be used to satisfy the minimum of 10 years of service credit

 

24  required to receive a retirement allowance under this act.

 

25        (3) If a member who made payment under this section dies and a

 

26  retirement allowance beneficiary has not been designated, or if the

 

27  member leaves reporting unit service before his or her retirement

 1  becomes effective, the payment made by the member shall must be

 

 2  refunded upon on request to the member or to the member's refund

 

 3  beneficiary.

 

 4        (4) A member who reduces hours of employment with a reporting

 

 5  unit for purposes of parental leave or a person who reduces hours

 

 6  of out of system public education service for purposes of parental

 

 7  leave and who subsequently becomes a member of this the retirement

 

 8  system may purchase service credit for those hours by which

 

 9  employment was reduced if all other requirements of this section

 

10  are met.

 

11        (5) A member requesting purchase of service credit under this

 

12  section shall submit an application as prescribed by the retirement

 

13  system in which the member shall certify the time period claimed

 

14  for parental leave and the purpose of the parental leave. If the

 

15  request for purchase of service credit under this section is a

 

16  result of leave taken to care for the member's child by birth or

 

17  adoption, then the member also shall submit a certified copy of a

 

18  birth certificate or adoption document from the appropriate court

 

19  of jurisdiction.

 

20        (6) Parental leave is creditable under this act until the

 

21  child, by birth or adoption, attains age 18 or is married,

 

22  whichever occurs first.

 

23        (7) After September 29, 2017 at 5 p.m. Eastern Daylight Saving

 

24  Time, a member is not eligible to initiate a service credit

 

25  purchase under this section.

 

26        (8) (7) As used in this section, "parental leave" means either

 

27  of the following:

 1        (a) The presence of the member in the active participation or

 

 2  supervision in the day-to-day, ongoing care or maintenance of his

 

 3  or her child by birth or adoption, for which the member reduced or

 

 4  eliminated the number of hours worked for the this state, in out-

 

 5  of-system public education service, or for the reporting unit in a

 

 6  normal work time period.

 

 7        (b) A member's pregnancy that occurred while a member, whether

 

 8  brought to full term or not, childbirth, and recuperation, for

 

 9  which the member reduced or eliminated the number of hours worked

 

10  for the this state, in out-of-system public education service, or

 

11  for the reporting unit in a normal work time period.

 

12        Sec. 79b. As used in this article, "initiate a service credit

 

13  purchase" means to complete payment or to enter into a tax-deferred

 

14  payment arrangement in a form and manner prescribed by the

 

15  retirement system.

 

16        Sec. 81c. (1) A member who first becomes a member on or after

 

17  July 1, 2010 who no longer is working as a public school employee

 

18  or in any other capacity for which service credit performed in this

 

19  state is allowed under this act, upon on the member's written

 

20  application to the retirement system, shall be is entitled to a

 

21  retirement allowance provided for in section 84(1) if the member is

 

22  60 years of age or older and has accumulated 10 or more years of

 

23  credited service pursuant to section 68 as a public school employee

 

24  and has reached regular retirement age.

 

25        (2) The eligibility requirements of subsection (1) shall must

 

26  not be modified as provided in section 43b.

 

27        (3) The reduction provided for in section 84(2) shall does not

 1  apply to a person an individual who retires pursuant to under this

 

 2  section.

 

 3        (4) Notwithstanding any other provision of this act, a member

 

 4  who first becomes a member on or after July 1, 2010 shall not

 

 5  purchase or transfer service credit under article 4 and shall not

 

 6  have any purchased or transferred service credit included in the

 

 7  calculation of a retirement allowance upon on retirement.

 

 8        (5) Beginning October 1, 2019 and for each fiscal year in

 

 9  which an experience investigation study is completed under section

 

10  41(16), if the most recent experience investigation study of

 

11  mortality of the retirement system using a 65-year-old based on a

 

12  50-50 male-female blend shows an increase of 1 or more years from

 

13  the previous experience investigation study of mortality, the

 

14  retirement board, in consultation with the actuary and the

 

15  department, shall increase the regular retirement age by at least 1

 

16  year up to the total increase in whole-year increments unless the

 

17  most recent actuarial funded ratio for the benefits funded under

 

18  section 41b(3) is greater than 100% after accounting for an

 

19  increase in mortality as reflected in the experience investigation

 

20  study. Any adjustment to the regular retirement age by the

 

21  retirement board must take place within 12 months after the

 

22  retirement board's adoption of the most recent experience

 

23  investigation study on an effective date as determined by the

 

24  retirement board. Any required increase to the regular retirement

 

25  age under this subsection must take into account the cumulative

 

26  increase in mortality relative to the experience investigation

 

27  study covering the period 2012 through 2017, less any actual

 1  increase already taken into account in a previous increase to the

 

 2  regular retirement age. An adjustment to the regular retirement age

 

 3  under this subsection does not apply to a member who, on the

 

 4  effective date of the increase, is within 5 years of the then

 

 5  current regular retirement age. The retirement board may

 

 6  additionally exclude members who, on the effective date of the

 

 7  increase, are within between 5 and 8 years of the then current

 

 8  regular retirement age.

 

 9        (6) As used in this section, "regular retirement age" means

 

10  the following:

 

11        (a) For a member who first becomes a member on or after July

 

12  1, 2010 and before February 1, 2018, 60 years of age and is not

 

13  subject to increase as provided under subsection (5).

 

14        (b) Subject to subsection (5), for a member who first becomes

 

15  a member on or after February 1, 2018, 60 years of age.

 

16        Sec. 81d. (1) The Except as provided in subsection (7), the

 

17  retirement system shall permit each qualified participant who first

 

18  becomes a qualified participant and first works for a reporting

 

19  unit on or after September 4, 2012 to make an election to not

 

20  become a member of Tier 1 and become only a qualified participant

 

21  in Tier 2.

 

22        (2) The retirement system shall determine a method of

 

23  accepting elections under subsection (1) and reporting units shall

 

24  secure those elections during the period beginning on the date of

 

25  the individual's employment and ending upon on the expiration of 75

 

26  days from the individual's first payroll date. An election under

 

27  subsection (1) is irrevocable. The retirement system shall provide

 1  a form on which each qualified participant who first becomes a

 

 2  qualified participant and first works for a reporting unit on or

 

 3  after February 1, 2018 may make an election under subsection (1).

 

 4  The form described in this subsection must be accompanied by a

 

 5  description of the benefit options. The form must include an

 

 6  acknowledgment that the qualified participant has received the

 

 7  description of the benefit options.

 

 8        (3) An individual A qualified participant who first becomes a

 

 9  qualified participant and first works for a reporting unit on or

 

10  after September 4, 2012 and before February 1, 2018 who does not

 

11  make an election under subsection (1) for any reason on or before

 

12  the close of the election period is considered to have made an

 

13  election to become a member of Tier 1 and is subject to all of the

 

14  following as of the date of his or her employment:

 

15        (a) He or she is eligible to accrue any service credit or

 

16  qualify for any retirement allowance under Tier 1 under the terms

 

17  as provided in section 81c.

 

18        (b) He or she is also a qualified participant under Tier 2.

 

19        (4) A qualified participant who first becomes a qualified

 

20  participant and first works for a reporting unit on or after

 

21  February 1, 2018 who does not make an election for any reason on or

 

22  before the close of the election period is considered to have made

 

23  an election to become only a qualified participant in Tier 2.

 

24        (5) (4) An individual who makes the election under subsection

 

25  (1) on or before the close of the election period or is a qualified

 

26  participant described in subsection (4) is considered to have made

 

27  an election to not become a member of Tier 1 and is subject to all

 1  of the following as of the date of his or her employment:

 

 2        (a) He or she is not eligible to accrue any service credit or

 

 3  qualify for any retirement allowance under Tier 1 under the terms

 

 4  as provided in section 81c.

 

 5        (b) He or she is only a qualified participant under Tier 2.

 

 6        (6) (5) The retirement system shall collect from the an

 

 7  individual described in subsection (1) all amounts required under

 

 8  sections 43a and 131(2) and shall collect all required employer

 

 9  contributions required under Tier 1 from his or her date of

 

10  employment. If an individual makes a valid election under

 

11  subsection (1) to not become a member of Tier 1 or is a qualified

 

12  participant under subsection (4), the retirement system shall

 

13  determine and implement a method to reconcile employer and employee

 

14  contributions to be deposited to Tier 2, and any such employee

 

15  contributions will be considered to be elective contributions under

 

16  section 131.

 

17        (7) A qualified participant who first becomes a qualified

 

18  participant and first works for a reporting unit following the

 

19  effective date of the qualifying event is only a Tier 2 qualified

 

20  participant and is considered to have made an election to become

 

21  only a qualified participant in Tier 2. As used in this subsection:

 

22        (a) "Effective date of the qualifying event" means 12 months

 

23  after the date that the retirement board receives the valuation

 

24  report showing that the qualifying event has occurred.

 

25        (b) "Qualifying event" means the date on which the actuarial

 

26  funded ratio for the plan for which the separate contribution rate

 

27  is calculated under section 41b(2) falls below 85% for 2

 1  consecutive years, based on the actuarial funded ratio using 5-year

 

 2  smoothing of investment returns. For purposes of valuation under

 

 3  this subdivision, the qualifying event does not occur if either of

 

 4  the following applies:

 

 5        (i) The actuarial funded ratio falls below 85% but would not

 

 6  have fallen below 85% but for the failure of the employer or this

 

 7  state to make a required contribution as calculated under section

 

 8  41b.

 

 9        (ii) This state makes an appropriation to the plan described

 

10  under this subdivision that increases the valuation as described

 

11  under this subsection to 85% or higher.

 

12        Sec. 92c. (1) There is appropriated for the fiscal year ending

 

13  September 30, 2017, $5,000,000.00 to the office of retirement

 

14  services in the department for administration of the changes under

 

15  the amendatory act that added this section.

 

16        (2) The appropriation authorized in subsection (1) is a work

 

17  project appropriation, and any unencumbered or unallotted funds are

 

18  carried forward into the following fiscal year. The following is in

 

19  compliance with section 451a(1) of the management and budget act,

 

20  1984 PA 431, MCL 18.1451a:

 

21        (a) The purpose of the project is to administer changes under

 

22  the amendatory act that added this section.

 

23        (b) The work project will be accomplished through a plan

 

24  utilizing interagency agreements, employees, and contracts.

 

25        (c) The total estimated completion cost of the work project is

 

26  $5,000,000.00.

 

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

 1  September 30, 2018.

 

 2        Sec. 108. (1) This section is enacted pursuant to federal law

 

 3  that imposes certain administrative requirements and benefit

 

 4  limitations for qualified governmental plans. This state intends

 

 5  that the retirement system be a qualified pension plan created in

 

 6  trust under section 401 of the internal revenue code, 26 USC 401,

 

 7  and that the trust be an exempt organization under section 501 of

 

 8  the internal revenue code, 26 USC 501. The department shall

 

 9  administer the retirement system to fulfill this intent.

 

10        (2) The retirement system shall be administered in compliance

 

11  with the provisions of section 415 of the internal revenue code, 26

 

12  USC 415, and regulations under that section that are applicable to

 

13  governmental plans and beginning January 1, 2010, applicable

 

14  provisions of the final regulations issued by the internal revenue

 

15  service on April 5, 2007. Employer-financed benefits provided by

 

16  the retirement system under this act shall not exceed the

 

17  applicable limitations set forth in section 415 of the internal

 

18  revenue code, 26 USC 415, as adjusted by the commissioner of

 

19  internal revenue under section 415(d) of the internal revenue code,

 

20  26 USC 415, to reflect cost-of-living increases, and the retirement

 

21  system shall adjust the benefits, including benefits payable to

 

22  retirants and retirement allowance beneficiaries, subject to the

 

23  limitation each calendar year to conform with the adjusted

 

24  limitation. For purposes of section 415(b) of the internal revenue

 

25  code, 26 USC 415, the applicable limitation shall apply to

 

26  aggregated benefits received from all qualified pension plans for

 

27  which the office of retirement services coordinates administration

 1  of that limitation. If there is a conflict between this section and

 

 2  another section of this act, this section prevails.

 

 3        (3) The assets of the retirement system shall be held in trust

 

 4  and invested for the sole purpose of meeting the legitimate

 

 5  obligations of the retirement system and shall not be used for any

 

 6  other purpose. The assets shall not be used for or diverted to a

 

 7  purpose other than for the exclusive benefit of the members,

 

 8  deferred members, retirants, and retirement allowance

 

 9  beneficiaries.

 

10        (4) The retirement system shall return post-tax member

 

11  contributions made by a member and received by the retirement

 

12  system to a member upon on retirement, pursuant to internal revenue

 

13  service regulations and approved internal revenue service exclusion

 

14  ratio tables.

 

15        (5) The required beginning date for retirement allowances and

 

16  other distributions shall not be later than April 1 of the calendar

 

17  year following the calendar year in which the employee attains age

 

18  70-1/2 or April 1 of the calendar year following the calendar year

 

19  in which the employee retires. The required minimum distribution

 

20  requirements imposed by section 401(a)(9) of the internal revenue

 

21  code, 26 USC 401, shall apply to this act and be administered in

 

22  accordance with a reasonable and good faith interpretation of the

 

23  required minimum distribution requirements for all years to which

 

24  the required minimum distribution requirements apply to the act.

 

25        (6) If the retirement system is terminated, the interest of

 

26  the members, deferred members, retirants, and retirement allowance

 

27  beneficiaries in the retirement system is nonforfeitable to the

 1  extent funded as described in section 411(d)(3) of the internal

 

 2  revenue code, 26 USC 411, and the related internal revenue service

 

 3  regulations applicable to governmental plans.

 

 4        (7) Notwithstanding any other provision of this act to the

 

 5  contrary that would limit a distributee's election under this act,

 

 6  a distributee may elect, at the time and in the manner prescribed

 

 7  by the retirement board, to have any portion of an eligible

 

 8  rollover distribution paid directly to an eligible retirement plan

 

 9  specified by the distributee in a direct rollover. This subsection

 

10  applies to distributions made on or after January 1, 1993.

 

11  Beginning October 1, 2010, a nonspouse beneficiary may elect to

 

12  have any portion of an amount payable under this act that is an

 

13  eligible rollover distribution treated as a direct rollover that

 

14  will be paid in a direct trustee-to-trustee transfer to an

 

15  individual retirement account or individual retirement annuity

 

16  described in section 408(a) or (b) of the internal revenue code, 26

 

17  USC 408, that is established for the purpose of receiving a

 

18  distribution on behalf of the beneficiary and that will be treated

 

19  as an inherited individual retirement account or individual

 

20  retirement annuity pursuant to section 402(c)(11) of the internal

 

21  revenue code, 26 USC 402.

 

22        (8) For purposes of determining actuarial equivalent

 

23  retirement allowances under sections 45 and 85(1)(b), (1)(c),

 

24  (1)(d), and (2), the actuarially assumed interest rate shall be 8%

 

25  with utilization of the 1983 group annuity and mortality table.

 

26  determined by the director of the department and the retirement

 

27  board in consultation with the actuary with utilization of the

 1  mortality tables adopted by the department and the retirement

 

 2  board.

 

 3        (9) Notwithstanding any other provision of this act, the

 

 4  compensation of a member of the retirement system shall be taken

 

 5  into account for any year under the retirement system only to the

 

 6  extent that it does not exceed the compensation limit established

 

 7  in section 401(a)(17) of the internal revenue code, 26 USC 401, as

 

 8  adjusted by the commissioner of internal revenue. This subsection

 

 9  applies to any person who first becomes a member of the retirement

 

10  system on or after October 1, 1996.

 

11        (10) Notwithstanding any other provision of this act,

 

12  contributions, benefits, and service credit with respect to

 

13  qualified military service will be provided under the retirement

 

14  system in accordance with section 414(u) of the internal revenue

 

15  code, 26 USC 414. This subsection applies to all qualified military

 

16  service on or after December 12, 1994. Effective January 1, 2007,

 

17  in accordance with section 401(a)(37) of the internal revenue code,

 

18  26 USC 401, if a member dies while performing qualified military

 

19  service, for purposes of determining any death benefits payable

 

20  under this act, the member shall be treated as having resumed and

 

21  then terminated employment on account of death.

 

22        Sec. 127. (1) Each qualified participant, former qualified

 

23  participant, and refund beneficiary shall direct the investment of

 

24  the individual's accumulated employer and employee contributions

 

25  and earnings to 1 or more investment choices within available

 

26  categories of investment provided by the department. The

 

27  limitations on the percentage of total assets for investments

 1  provided in the public employee retirement system investment act,

 

 2  1965 PA 314, MCL 38.1132 to 38.1140m, 38.1141, do not apply to Tier

 

 3  2.

 

 4        (2) In addition to the categories of investment provided by

 

 5  the department under subsection (1), the retirement system shall

 

 6  offer access to 1 or more fixed annuity options and 1 or more

 

 7  variable annuity options.

 

 8        Sec. 131. (1) This section is subject to the vesting

 

 9  requirements of section 132.

 

10        (2) Unless a qualified participant who is also a member of

 

11  Tier 1 affirmatively elects not to contribute or elects to

 

12  contribute a lesser amount, the qualified participant who is also a

 

13  member of Tier 1 shall contribute 2% of his or her compensation to

 

14  his or her Tier 2 account. The qualified participant's employer

 

15  shall make a contribution to the qualified participant's Tier 2

 

16  account in an amount equal to 50% of the first 2% of compensation

 

17  contributed by the qualified participant under this subsection.

 

18        (3) A qualified participant may make contributions in addition

 

19  to contributions made under subsection (2) to his or her Tier 2

 

20  account as permitted by the department and the internal revenue

 

21  code.

 

22        (4) Upon On the written determination of the director of the

 

23  office of retirement services, an employee of an employer that is

 

24  not a qualified participant may elect to make contributions to a

 

25  Tier 2 account as permitted by the department and the internal

 

26  revenue code. An employee as described in this subsection shall be

 

27  is treated as a qualified participant under this article for the

 1  limited purposes of his or her Tier 2 account.

 

 2        (5) Upon On the written determination of the director of the

 

 3  office of retirement services, an employer may annually elect to

 

 4  make additional matching contributions, including those in addition

 

 5  to matching contributions made under subsections (2) and (6), to an

 

 6  employee's Tier 2 account as permitted by the plan document and the

 

 7  internal revenue code. Matching contributions under this subsection

 

 8  shall must be made in amounts equal to 50% of the contributions

 

 9  made by the employee not to exceed the first 4% of contributions

 

10  made in whole percentages only, for any employee in addition to

 

11  amounts that are already matched under this section, if any.

 

12        (6) Except as otherwise provided in section 81d, unless a

 

13  qualified participant who is only a Tier 2 qualified participant

 

14  due to an election made under section 81d(1) affirmatively elects

 

15  not to contribute or elects to contribute a lesser amount, the

 

16  qualified participant shall contribute 6% of his or her

 

17  compensation to his or her Tier 2 account. The Until January 31,

 

18  2018, the qualified participant's employer shall make a

 

19  contribution to the qualified participant's Tier 2 account in an

 

20  amount equal to 50% of the first 6% of compensation contributed by

 

21  the qualified participant under this subsection. Beginning February

 

22  1, 2018, the qualified participant's employer shall make a

 

23  contribution to the qualified participant's Tier 2 account in an

 

24  amount equal to 100% of the first 3% of compensation contributed by

 

25  the qualified participant under this subsection. Beginning February

 

26  1, 2018, all contributions made by an employer under this

 

27  subsection must be paid by appropriation from the state school aid

 1  fund established by section 11 of article IX of the state

 

 2  constitution of 1963, assuming 100% participation by all qualified

 

 3  participants.

 

 4        (7) For a qualified participant who is only a Tier 2 qualified

 

 5  participant under section 81d, beginning with the first available

 

 6  pay period after October 1, 2017, the qualified participant's

 

 7  employer shall make a contribution to the qualified participant's

 

 8  Tier 2 account in an amount equal to 4% of the qualified

 

 9  participant's compensation.

 

10        Sec. 131a. Tier 2 accounts are subject to the following terms

 

11  and conditions:

 

12        (a) On or before January 1, 2013, the retirement system shall

 

13  design an automatic enrollment feature that provides that unless a

 

14  qualified participant who makes contributions under this act elects

 

15  to contribute a lesser amount, the qualified participant shall

 

16  contribute the amount required to qualify for all eligible matching

 

17  contributions under this act. The retirement system shall implement

 

18  this automatic enrollment feature on or after January 1, 2013, as

 

19  determined by the retirement system.

 

20        (b) Employer matching contributions do not have to be made to

 

21  the same plan or account to which the elective employee

 

22  contributions were contributed as the basis for the matching

 

23  contributions.

 

24        (c) Elective employee contributions shall not be used as the

 

25  basis for more than an equivalent amount of employer matching

 

26  contributions or, in the case of matching contributions under

 

27  section 131(2), and (6), 50% of the employer matching

 1  contributions.

 

 2        (d) The retirement system shall design and implement a method

 

 3  to determine the proper allocation of employer matching

 

 4  contributions based on elective employee contributions as provided

 

 5  in this section.