MPSERS Reform Passes in the Legislature: The legislature has tied final passage of the FY 2017-18 State Budget to reforming the Michigan Public School Employees Retirement System (MPSERS).  After the Governor and legislative leaders came to agreement last Tuesday on both the final spending levels for all parts of the State budget and changes to the MPSERS, the fast-tracked identical bills  HB 4647 and SB 0401 moved out of the House and Senate committees on Wednesday, with full passage in the House (55-52 vote) and Senate (21-17) on Thursday.  Because of the constitutional requirement that a bill wait five days after it passes one chamber before the other takes it up, the bills will likely be sent to the Governor for his signature later this week. 

SB 0401 and HB 4647 do not close the MPSERS system, but instead create a number of reforms outlined in detail in the Senate Fiscal Agency analysis.  The major changes contained in both bills include:

  • Starting February 1 of 2018, new employees would be placed into a defined contribution (DC) plan as the default, with an option to select a hybrid defined benefit (DB) plan if they chose to do so.
  • The new DC plan would be enhanced by requiring a 4% mandatory employer contribution, and optional 3% employee contribution, with an additional 3% employer match paid by the School Aid Fund (SAF).  Currently, employers are only required to match 3% of the employees' first 6% of employee contributions.
  • It would require that the normal cost of the hybrid plan be split 50/50 between employer and employee.  Normal costs are estimated at about 12% of payroll, i.e. it would be a 6%/6% cost share.  Additionally, any future unfunded liability that may occur would be covered 50/50 between employer and employee.
  • The assumed rate of pension fund earnings would be reduced from 7.5% to 6%.  Doing so represents the largest single cost associated with the bill, as with less assumed earnings, increased contributions are required.
  • It would provide a "trigger" that would close the hybrid system if the funded ratio of the hybrid plan fell below 85% for two consecutive years based on a five-year smoothing, and a 12 month time period for the State to appropriate funds to avoid closure of the hybrid.
 

Community College Budget: No changes are anticipated from the community college appropriations bill that was reported from the joint House-Senate conference committee on May 6. The conference committee concurred with the operations funding increases proposed by the Senate, although they shifted the funding source to the School Aid Fund. The conference committee also included the proposed funding for the Michigan Transfer Network upgrades.  Full details are available on the MCCA website. The conference report will first go to the House of Representatives and then to the Senate for approval, where it cannot be amended. 

 
 
 

 

HELPFUL LINKS

Michigan Legislature’s website (bill tracking and committee meetings)

Michigan House of Representatives

Michigan Senate

Community College Legal Authority (Michigan Constitution)

Community College Act of 1966

 

For the map of the community college districts, click here.

 

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