Bill Text: MI SB0157 | 2023-2024 | 102nd Legislature | Introduced
Bill Title: Retirement: state police; membership in the retirement system of a corrections officer first hired after certain date; provide for, and allow for purchasing service credit for certain corrections officers' service under the state employees' retirement system. Amends secs. 3, 4, 14 & 70 of 1986 PA 182 (MCL 38.1603 et seq.) & adds secs. 14b & 24c. TIE BAR WITH: SB 0156'23
Spectrum: Bipartisan Bill
Status: (Introduced) 2023-03-09 - Referred To Committee On Labor [SB0157 Detail]
Download: Michigan-2023-SB0157-Introduced.html
SENATE BILL NO. 157
A bill to amend 1986 PA 182, entitled
"State police retirement act of 1986,"
by amending sections 3, 4, 14, and 70 (MCL 38.1603, 38.1604, 38.1614, and 38.1670), sections 3, 4, and 14 as amended and section 70 as added by 2018 PA 674, and by adding sections 14b and 24c.
the people of the state of michigan enact:
Sec. 3. (1) "Banked leave time program" means the part B annual leave hours within the state's annual and sick leave program approved by a ruling of the Internal Revenue Service on September 5, 2003, in which a pay reduction or other concessions are applied to a member in exchange for additional part B annual leave hours.
(2) "Credited service" means the sum of the prior service and membership service credited to a member's account.
(3) "Deferred member" means a member who separates from service with entitlement to a deferred retirement allowance as provided in section 30, but who is not a retirant.
(4) "Department" means the department of technology, management, and budget.
(5) "Direct rollover" means a payment by the retirement system to the eligible retirement plan specified by the distributee.
(6) "Distributee" includes a member or deferred member. Distributee also includes the member's or deferred member's surviving spouse or the member's or deferred member's spouse or former spouse under an eligible domestic relations order, with regard to the interest of the spouse or former spouse.
(7) "DROP participant" means an officer who participates in the deferred retirement option plan established in section 24a.
(8) Beginning January 1, 2002, except as otherwise provided in this subsection, "eligible retirement plan" means 1 or more of the following:
(a) An individual retirement account described in section 408(a) of the internal revenue code, 26 USC 408.
(b) An individual retirement annuity described in section 408(b) of the internal revenue code, 26 USC 408.
(c) An annuity plan described in section 403(a) of the internal revenue code, 26 USC 403.
(d) A qualified trust described in section 401(a) of the internal revenue code, 26 USC 401.
(e) An annuity contract described in section 403(b) of the internal revenue code, 26 USC 403.
(f) An eligible plan under section 457(b) of the internal revenue code, 26 USC 457, that is maintained by a state, political subdivision of a state, or an agency or instrumentality of a state or political subdivision of a state and that agrees to separately account for amounts transferred into the eligible plan under section 457(b) of the internal revenue code, 26 USC 457, from this retirement system, that accepts the distributee's eligible rollover distribution.
(g) Beginning January 1, 2008, a Roth individual retirement account as described in section 408A of the internal revenue code, 26 USC 408A, subject to the rules that apply to rollovers from a traditional individual retirement account to a Roth individual retirement account.
(9) Beginning January 1, 2007, "eligible rollover distribution" means a distribution of all or any portion of the balance to the credit of the distributee. Eligible rollover distribution does not include any of the following:
(a) A distribution made for the life or life expectancy of the distributee or the joint lives or joint life expectancies of the distributee and the distributee's designated beneficiary.
(b) A distribution for a specified period of 10 years or more.
(c) A distribution to the extent that the distribution is required under section 401(a)(9) of the internal revenue code, 26 USC 401.
(d) The portion of any distribution that is not includable in federal gross income, except to the extent the portion of the distribution is paid to either of the following:
(i) An individual retirement account or annuity described in section 408(a) or 408(b) of the internal revenue code, 26 USC 408.
(ii) A qualified plan described in section 401(a) of the internal revenue code, 26 USC 401, or an annuity contract described in section 403(b) of the internal revenue code, 26 USC 403, and the plan providers agree to separately account for the amounts paid, including any portion of the distribution that is includable in federal gross income, and the portion of the distribution that is not so includable.
(10) "Final average compensation" means, except as otherwise provided in this subsection, the average annual salary for the last 2 years of service with the department of state police, department of corrections, or department of health and human services, as applicable, for which the member was compensated as defined in subsection (13). Except as otherwise provided in this subsection, for a nonclassified member of the department holding the rank of colonel, final average compensation means the same average annual salary as that computed for the highest salaried classified member of the department, or at the average annual salary for the last 2 years of service with the department of state police for which the member was compensated, whichever is greater. Beginning with the effective date of the amendatory act that added section 42a, December 28, 2018, for a member who first became a member on or after June 10, 2012, final average compensation means the average salary for the last 5 years of service for which the member was compensated as defined in subsection (14). Average annual salary includes only the following compensation items:
(a) Beginning with the effective date of the amendatory act that added section 42a, December 28, 2018, for a member who first became a member before June 10, 2012, only the following compensation items:
(i) Regular salary paid for the last 2 years of service, including, but not limited to, that salary that is deferred pursuant to a state deferred compensation program.
(ii) Overtime, shift differential, and shift differential overtime paid for the last 2 years of service.
(iii) Gross pay adjustments paid affecting the last 2 years of service, including compensatory time and emergency response compensation.
(iv) Up to a maximum of 240 hours of accumulated annual leave, paid at the time of retirement separation excluding part B annual leave hours paid at the time of retirement separation.
(v) Deferred hours under Plan B of the fiscal years ending September 30, 1981, and September 30, 1982, that are paid at the time of retirement separation.
(vi) Longevity pay equal to 2 full years.
(vii) Bomb squad pay paid for the last 2 years of service.
(viii) Post 29 freeway premium paid for the last 2 years of service.
(ix) On-call pay paid for the last 2 years of service.
(x) Beginning October 1, 2003, the value of any unpaid furlough hours or the value of any unpaid hours exchanged for part B annual leave hours, calculated at the member's then-current hourly rate or rates of pay, for a period during which a member is participating in the banked leave time program.
(xi) Beginning May 1, 2009, the value of temporary layoff hours. As used in this subparagraph, "temporary layoff hours" means hours attributable to the layoff of a member if the layoff does not exceed 1 month and has a fixed, predetermined, and announced recall date.
(b) Beginning with the effective date of the amendatory act that added section 42a, December 28, 2018, for a member who first became a member on or after June 10, 2012, only the following compensation items:
(i) Regular salary paid for the last 5 years of service, including, but not limited to, that salary that is deferred pursuant to a state deferred compensation program.
(ii) Shift differential.
(iii) Gross pay adjustments paid affecting the last 5 years of service, including compensatory time and emergency response compensation.
(iv) Up to a maximum of 240 hours of accumulated annual leave, paid at the time of retirement separation excluding part B annual leave hours paid at the time of retirement separation.
(v) Longevity pay equal to 5 full years.
(vi) Bomb squad pay paid for the last 5 years of service.
(vii) Post 29 freeway premium paid for the last 5 years of service.
(viii) On-call pay paid for the last 5 years of service.
(ix) The value of any unpaid furlough hours or the value of any unpaid hours exchanged for part B annual leave hours, calculated at the member's then-current hourly rate or rates of pay, for a period during which a member is participating in the banked leave time program.
(x) The value of temporary layoff hours. As used in this subparagraph, "temporary layoff hours" means hours attributable to the layoff of a member if the layoff does not exceed 1 month and has a fixed, predetermined, and announced recall date.
(11) "Furlough hours" means unworked hours incurred in conjunction with the banked leave time program.
(12) "Internal revenue code" means the United States internal revenue code of 1986.
(13) "Last 2 years of service" means the 2-year period immediately preceding the member's last day of service or that period of 2 consecutive years of service with the department of state police, department of corrections, or department of health and human services, as applicable, immediately preceding the date the duty disability occurred according to the medical examinations conducted under section 29 or, if the officer participated in the deferred retirement option plan, the 2-year period immediately preceding participation in the deferred retirement option plan.
(14) "Last 5 years of service" means the 5-year period immediately preceding the member's last day of service or that period of 5 consecutive years of service with the department of state police, department of corrections, or department of health and human services, as applicable, immediately preceding the date the duty disability occurred according to the medical examinations conducted under section 29.
Sec. 4. (1) "Member", except where the context otherwise requires, means an either of the following:
(a) An employee of the department of state police who has subscribed to the constitutional oath of office.
(b) An individual employed in a covered position who elected to terminate his or her participation in the state employees' retirement system under section 50b of the state employees' retirement act, 1943 PA 240, MCL 38.50b. An individual described in this subdivision is treated as an individual who first becomes a member on or after June 10, 2012. As used in this subdivision, "covered position" means that term as defined in section 45 of the state employees' retirement act, 1943 PA 240, MCL 38.45.
(2) "Officer" means a nonexclusively represented member of the retirement system.
(3) "Qualified participant" means an individual who first becomes a member on or after June 10, 2012 and who is also a participant of Tier 2.
(4) "Regular interest" means a rate or rates per annum, compounded annually, as the retirement board determines. For the purposes of employee refunds, the interest rate payable must not exceed 4% per annum, compounded annually.
(5) "Retirant" means a member who separates from service and retires with a retirement allowance payable from the appropriate reserve of the retirement system.
(6) "Retirement allowance" means the annual amount, payable monthly, to which a retirant, retirement allowance beneficiary, or refund beneficiary is entitled under this act.
(7) "Retirement allowance beneficiary" means a person who is being paid or has entitlement to the payment of a retirement allowance in the event of the death of a member, deferred member, or retirant.
(8) "Retirement board" means the retirement board created in section 6.
(9) "Retirement system" means the system of benefits for members and qualified participants of the department of state police and their survivors and beneficiaries provided by this act.
(10) "Surviving spouse" means the spouse at the time of death of the member or retirant.
(11) "Tier 1" means the retirement plan available to a member under this act.
(12) "Tier 2" means the retirement plan established pursuant to section 401(k) of the internal revenue code, 26 USC 401, that is available to qualified participants under sections 62 to 74.
Sec. 14. (1) The funding objective of the retirement system is to establish and receive contributions during each fiscal year that are sufficient to fully cover the actuarial cost of benefits likely to be paid on account of services rendered by members during the fiscal year , and the normal cost requirements of the retirement system , and to finance the unfunded actuarial costs of benefits likely to be paid on account of service rendered before the fiscal year, the unfunded actuarial accrued liability of the retirement system, and health, dental, and vision insurance.
(2) Subject Except as otherwise provided in section 14b, and subject to subsections (5) to (7), the annual level percentage of payroll contribution rate must be actuarially determined using experience assumptions and level percent of payroll actuarial cost methods adopted by the retirement board and the department pursuant to an annual actuarial valuation, which must be sufficient to finance benefits being provided and to be provided by the retirement system.
(3) Subject to subsections (5) to (7), for differences occurring in fiscal years beginning on or after October 1, 2001, a minimum of 20% of the difference between the estimated and the actual aggregate compensation and the estimated and the actual contribution rate described in subsection (2), if any, may be submitted in the executive budget to the legislature for appropriation in the next succeeding state fiscal year and a minimum of 25% of the remaining difference must be submitted in the executive budget to the legislature for appropriation in each of the following 4 state fiscal years, or until 100% of the remaining difference is submitted, whichever first occurs. In addition, interest must be included for each year that a portion of the remaining difference is carried forward. The interest rate must equal the actuarially assumed rate of investment return for the state fiscal year in which payment is made.
(4) For each fiscal year that begins on or after October 1, 2003, if the actuarial valuation prepared under this section for each the fiscal year demonstrates that as of at the beginning of a fiscal year, and after all credits and transfers required by this act for the previous fiscal year have been made, the sum of the actuarial value of assets and the actuarial present value of future normal cost contributions exceeds the actuarial present value of benefits, the amount based on the annual level percent of payroll contribution rate under subsections (1) and (2) may be deposited into the health advance funding subaccount created by section 42.
(5) Beginning with the state fiscal year ending September 30, 2022 until the pension and retiree health care payroll growth assumption rate is zero, the payroll growth assumption rate must be reduced by 50 basis points. Beginning with the state fiscal year ending September 30, 2022, the office of retirement services within the department of technology, management, and budget and the retirement board may agree to reduce the rate described in this subsection by any number of additional basis points.
(6) Beginning with the state fiscal year ending September 30, 2019 and for each subsequent fiscal year, the normal cost contribution rate must not be less than the normal cost contribution rate in the immediately preceding fiscal year. Additionally, the employer portion of the contribution rate must not be less than the employer portion of the contribution rate in the immediately preceding fiscal year.
(7) Subject to this subsection, beginning with the state fiscal year ending September 30, 2019 and for each subsequent fiscal year until the unfunded actuarial accrued liability is paid, off, the unfunded actuarial accrued liability contribution sum and due payable must not be less than the unfunded actuarial accrued liability contribution sum and due payable in the immediately preceding fiscal year. The unfunded actuarial accrued liability must be paid off no later than September 30, 2038. Additionally, the employer portion of the unfunded actuarial accrued liability contribution sum and due payable must not be less than the employer portion of the unfunded actuarial accrued liability contribution sum and due payable in the immediately preceding fiscal year.
(8) Notwithstanding any other provision of this act, if the retirement board establishes an arrangement and fund as described in section 6 of the public employee retirement benefit protection act, 2002 PA 100, MCL 38.1686, the benefits that are required to be paid from that fund must be paid from a portion of the employer contributions described in this section or other eligible funds. The retirement board shall determine the amount of the employer contributions or other eligible funds that must be allocated to that fund and deposit that amount in that fund before it deposits any remaining employer contributions or other eligible funds in the pension fund.
Sec. 14b. The retirement system shall determine a separate contribution rate for members who are employed in covered positions. The retirement system shall determine the separate contribution rate in the manner prescribed in section 14, except that any increase or decrease in the unfunded actuarial accrued liabilities associated with members who are employed in covered positions must be amortized on a 10-year level-dollar schedule with a new contribution rate calculated for each year. As used in this section, "covered position" means that term as defined in section 45 of the state employees' retirement act, 1943 PA 240, MCL 38.45.
Sec. 24c. (1) Subject to subsection (5), the retirement system shall grant service under this act for service rendered under the state employees' retirement act, 1943 PA 240, MCL 38.1 to 38.69, to a member described in section 4(1)(b) if the member pays to the retirement system an amount equal to the actuarial value of the service as determined by the retirement system's actuary.
(2) Service under the state employees' retirement act, 1943 PA 240, MCL 38.1 to 38.69, is not creditable toward retirement under this act if the member is or will be receiving a retirement allowance for the same service from another retirement system.
(3) A member described in subsection (1) is not required to do either of the following:
(a) Purchase any service credit under this section for service rendered under the state employees' retirement act, 1943 PA 240, MCL 38.1 to 38.69.
(b) If the member does purchase service credit under this section for service rendered under the state employees' retirement act, 1943 PA 240, MCL 38.1 to 38.69, purchase all of the service rendered under the state employees' retirement act, 1943 PA 240, MCL 38.1 to 38.69.
(4) A member has 5 years after the date of initiating service credit purchase under this section to complete payment. If a member does not complete purchasing service credit within 5 years after the date of initiating the purchase, the member will not be granted service credit under this section. A member may purchase service under this section in 1 or more of the following manners:
(a) Tax deferred payments, in a form and manner as determined by the retirement system.
(b) Additional payments, in a form and manner as determined by the retirement system.
(5) The retirement system shall establish a method to implement the payments under subsection (4).
(6) For purposes of vesting under section 42b, a member is granted service under this act for service rendered under the state employees' retirement act, 1943 PA 240, MCL 38.1 to 38.69, even if the member did not purchase service under this section.
Sec. 70. (1) This section is subject to the vesting requirements of section 42b.
(2) Unless the qualified participant affirmatively elects not to contribute or elects to contribute a lesser amount, the qualified participant shall contribute 2% of his or her compensation to his or her Tier 2 account. The qualified participant's employer shall make a contribution to the qualified participant's Tier 2 account in an amount equal to 50% of the first 2% of compensation contribution made by the qualified participant under this subsection.
(3) A qualified participant may make contributions in addition to contributions made under subsection (2) to his or her Tier 2 account as permitted by the department and the internal revenue code.
(4) For a qualified participant who is employed in a covered position, in addition to the employer contribution under subsection (2), the qualified participant's employer shall make a contribution to the qualified participant's Tier 2 account as follows:
(a) If the qualified participant has 5 years or more but less than 10 years of completed service, 1% of his or her compensation.
(b) If the qualified participant has 10 years or more but less than 15 years of completed service, 2% of his or her compensation.
(c) If the qualified participant has 15 years or more but less than 20 years of completed service, 3% of his or her compensation.
(d) If the qualified participant has 20 years or more of completed service, 4% of his or her compensation.
(5) As used in this section, "covered position" means that term as defined in section 45 of the state employees' retirement act, 1943 PA 240, MCL 38.45.
Enacting section 1. This amendatory act does not take effect unless Senate Bill No. 156 of the 102nd Legislature is enacted into law.
