Bill Text: MI HB6066 | 2011-2012 | 96th Legislature | Introduced
Bill Title: Retirement; state employees; calculation of amount credited at termination in lieu of health premium; revise interest discount rate. Amends sec. 68b of 1943 PA 240 (MCL 38.68b).
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2012-12-04 - Printed Bill Filed 11/30/2012 [HB6066 Detail]
Download: Michigan-2011-HB6066-Introduced.html
HOUSE BILL No. 6066
November 29, 2012, Introduced by Rep. McMillin and referred to the Committee on Appropriations.
A bill to amend 1943 PA 240, entitled
"State employees' retirement act,"
by amending section 68b (MCL 38.68b), as added by 2011 PA 264.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 68b. (1) A qualified participant or former qualified
participant who was first employed and entered upon the payroll of
his or her employer on or after January 1, 2012 or who made an
election under subsection (5) or (6) shall not receive any health
insurance coverage premium from this state under section 68. In
lieu of any health insurance coverage premium that might have been
paid by this state under section 68, a qualified participant's
employer shall make a matching contribution up to 2% of the
qualified participant's compensation to an appropriate tax-deferred
account for each qualified participant who was first employed and
entered upon the payroll of his or her employer on or after January
1, 2012 or who made an election under subsection (5) or (6). A
matching contribution under this subsection shall not be used as
the basis for a loan from an employee's Tier 2 or tax-deferred
account.
(2) A qualified participant who was first employed and entered
upon the payroll of his or her employer on or after January 1, 2012
or who made an election under subsection (5) or (6) may make a
contribution up to 2% of the qualified participant's compensation
to an appropriate tax-deferred account.
(3) Except as otherwise provided in this subsection, a
qualified participant is vested in contributions made to his or her
tax-deferred account under subsections (1) and (2) according to the
vesting provisions under section 64(1). A qualified participant who
is eligible for health insurance coverage under section 67a(4) or
(8) is not vested in any employer contributions under subsection
(1) and forfeits the contributions and earnings on the
contributions.
(4) The contributions described in this section shall begin
with the first payday after the qualified participant is employed
or on or after April 1, 2012 for a qualified participant who makes
an election under subsection (5) or (6) and end upon his or her
termination of employment.
(5) Except as otherwise provided in this subsection, beginning
January 3, 2012 and ending at 5 p.m. eastern standard time on March
2, 2012, the retirement system shall permit each qualified
participant who is a qualified participant on December 31, 2011 to
make an election to opt out of the health insurance coverage
premium that would have been paid by this state under section 68
and opt in to the tax-deferred account provisions of this section
effective April 1, 2012. A qualified participant who is a qualified
participant on December 31, 2011 and who does not make the election
under this subsection continues to be eligible for the health
insurance coverage premium paid by this state under section 68 and
is not eligible for the tax-deferred account provisions of this
section. A qualified participant who is a qualified participant on
December 31, 2011 and who makes the election under this subsection
shall cease accruing years of service credit for purposes of
calculating a portion of the health insurance coverage premium that
would have been paid by this state under section 68 as if that
section continued to apply and for the portion of the amount to be
calculated under subsection (7) for crediting to a tax-deferred
account. This subsection does not apply to any of the following:
(a) A former member who made an election to become a qualified
participant under section 50.
(b) A member who did not make the election under section 50a.
(c) A member who made the election under section 50a(1) and
the designation under section 50a(2), who has attained 30 years of
credited service, and who remains employed by this state.
(d) A former qualified participant who was a former qualified
participant on December 31, 2011.
(6) Except as otherwise provided in this subsection, a former
qualified participant who has 10 or more years of service on or
before December 31, 2011 and who is reemployed by this state on or
after January 1, 2012 and before January 1, 2014 may make an
election under this subsection and receive an amount, if any, as
determined under this section. Beginning on the date of the former
qualified participant's reemployment and ending 60 days after the
former qualified participant's first pay date, the retirement
system shall permit the former qualified participant to make an
election to opt out of the health insurance coverage premium that
would have been paid by this state under section 68 and opt in to
the tax-deferred account provisions of this section effective on or
after the former qualified participant's date of reemployment. If
the former qualified participant does not make the election under
this subsection, he or she continues to be eligible for the health
insurance coverage premium paid by this state under section 68 and
is not eligible for the tax-deferred account provisions of this
section. A former qualified participant who makes the election
under this subsection ceases to accrue years of service credit for
purposes of calculating a portion of the health insurance coverage
premium that would have been paid by this state under section 68 as
if that section continued to apply and for purposes of calculating
the portion of the amount to be credited to a tax-deferred account
under subsection (7). This subsection does not apply to any of the
following:
(a) A former member who made an election to become a qualified
participant under section 50.
(b) A member who did not make the election under section 50a.
(c) A member who made the election under section 50a(1) and
the designation under section 50a(2), who has attained 30 years of
credited service, and who remains employed by this state.
(7) Except as otherwise provided in this section, in lieu of
any health insurance coverage premium that might have been paid by
this state under section 68, the retirement system shall calculate
an amount to be credited at termination to an appropriate tax-
deferred account for each qualified participant who makes an
election under subsection (5) or (6). The amount described in this
subsection shall be an amount calculated to approximate the
actuarial present value as of 12 midnight March 31, 2012 of the
projected retirant health benefits based on the current benefit
structure under section 68 and the qualified participant's years of
service as of March 31, 2012. The amount calculated under this
subsection shall be equal to the product of all of the following as
determined by the retirement system in consultation with the
actuary for the system:
(a) An average monthly premium of $1,000.00, payable for the
life of the qualified participant, which approximates the overall
average value of all types of premium coverages for single and
multiple lives during both pre-medicare and post-medicare periods.
(b) A frozen benefit accrual percent that is the product of 3%
and the qualified participant's years of service as of March 31,
2012, up to 30 years.
(c) A deferred life annuity factor equal to the actuarial
present value as of March 31, 2012 of $1.00 per month payable for
the life of the qualified participant, based on the following
actuarial assumptions:
(i) An interest discount rate of 4% annually for all future
years, which approximates the use of an assumed rate of investment
return
or interest discount rate of 8% 5.4%, combined with an
assumption that the average premium is projected to increase 4%
annually for all future years.
(ii) Mortality rates based on a 50% male - 50% female blend of
the 1994 group annuity mortality table set forward 1 year for both
males and females.
(iii) Commencement of the $1.00 per month deferred life annuity
based on an assumption that the qualified participant will
terminate employment upon reaching age 60 and that the qualified
participant would have received health insurance coverage
immediately upon termination of employment.
(8) The amount calculated under subsection (7) shall be
adjusted annually from March 31, 2012 to the date of the qualified
participant's actual termination of employment. Except as otherwise
provided in this subsection, the retirement system shall establish
the amount of the annual adjustment to be equal to the change in
the medical care component of the United States consumer price
index for the most recent 12-month period for which data are
available from the bureau of labor statistics of the United States
department of labor. The adjustment under this subsection shall not
be less than 0% and shall not be more than 4%.
(9) The amount calculated under subsection (7) and adjusted
under subsection (8) shall be credited at the qualified
participant's first termination of employment following December
31, 2011, to the qualified participant's tax–deferred account
according to the following schedule:
(a) One hundred percent of the calculated amount to a
qualified participant who is at least 60 years of age with at least
10 years of service or is at least 55 years of age with at least 30
years of service.
(b) Fifty percent of the calculated amount to a qualified
participant who has at least 10 years of service and who does not
meet the age and service qualifications of subdivision (a).
(10) An individual who is a former qualified participant on
December 31, 2011, who has 10 or more years of service on or before
December 31, 2011, and who is reemployed by this state on or after
January 1, 2014 shall be treated in the same manner as a qualified
participant under this section who made the election under
subsection (5) and shall receive an amount, if any, as determined
under this section. This subsection does not apply to any of the
following:
(a) A former member who made the election to become a
qualified participant under section 50.
(b) A member who did not make the election under section 50a.
(c) A member who made the election under section 50a(1) and
the designation under section 50a(2), who has attained 30 years of
credited service, and who remains employed by this state.
(11) In lieu of any other health insurance coverage that might
have been paid by this state, a credit to a health reimbursement
account within the trust created under the public employee
retirement health care funding act, 2010 PA 77, MCL 38.2731 to
38.2747, shall be made by this state in the amounts and to the
qualified participants or former qualified participants as follows:
(a) Two thousand dollars to a qualified participant who was
first employed and entered upon the payroll of his or her employer
on or after January 1, 2012, who is 60 years of age or older, and
who has at least 10 years of service at his or her first
termination of employment.
(b) One thousand dollars to a qualified participant who was
first employed and entered upon the payroll of his or her employer
on or after January 1, 2012, who is less than 60 years of age, and
who has at least 10 years of service at his or her first
termination of employment.
(c) Two thousand dollars to a former qualified participant who
has less than 10 years of service as of December 31, 2011, who is
reemployed by this state on or after January 1, 2012, who is 60
years of age or older, and who has at least 10 years of service at
his or her first termination of employment following December 31,
2011. This subdivision does not apply to an individual described in
subsection (10)(a), (b), or (c).
(d) One thousand dollars to a former qualified participant who
has less than 10 years of service as of December 31, 2011, who is
reemployed by this state on or after January 1, 2012, who is less
than 60 years of age, and who has at least 10 years of service at
his or her first termination of employment following December 31,
2011. This subdivision does not apply to an individual described in
subsection (10)(a), (b), or (c).
(e) Two thousand dollars shall be the minimum amount credited
to a qualified participant who made an election under subsection
(5) and who does not otherwise qualify for an amount or qualifies
for a lesser amount under this subsection at his or her first
termination of employment after December 31, 2011.
(12) The retirement system shall determine a method to
implement subsections (5) to (11), including a method for crediting
the amounts in subsection (9) to comply with any contribution
limits imposed by the internal revenue code, including, but not
limited to, crediting of payments before termination of employment.
(13) Subsections (5) to (11) do not apply to a qualified
participant who is eligible for health insurance coverage under
section 67a(4) or (8).
(14) On or before January 1, 2017, the retirement system shall
provide a report to the chair of the house and senate
appropriations committees that provides the projected impact of
subsection (11) as it applies to qualified participants entered
upon the payroll of this state on or after January 1, 2017 with
regard to the annual required contribution as used by the
governmental accounting standards board and for purposes of the
annual financial statements prepared under section 12(1).
