HOUSE BILL No. 5879 June 8, 2000, Introduced by Reps. Kilpatrick, Hanley, Schauer, Woodward, Dennis, Jacobs, Switalski, Baird, Spade, Mans, O'Neil, Lockwood, Callahan, Clarke, Jamnick, Minore, Gieleghem, Wojno, Garza, Sheltrown, Hardman, Cherry, Brater, Martinez, Rivet, Neumann, Frank, Pestka, Clark, Reeves, Quarles, Brewer, LaForge, Rison, Basham, Hansen, Daniels, Hale, Bogardus, Vaughn, Schermesser, Prusi, DeHart, Bovin, Tesanovich, Lemmons, Price, Thomas, Bob Brown, Kelly and Stallworth and referred to the Committee on Senior Health, Security and Retirement. A bill to amend 1943 PA 240, entitled "State employees' retirement act," by amending section 38 (MCL 38.38), as amended by 1996 PA 279. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 38. (1) The annual level percent of payroll contribu- 2 tion rate to finance the benefits provided under this act shall 3 be determined by actuarial valuation pursuant to subsections (2) 4 and (3), upon the basis of the risk assumptions adopted by the 5 retirement board with approval of the department of management 6 and budget, and in consultation with the investment counsel and 7 the actuary. An annual actuarial valuation shall be made of the 8 retirement system in order to determine the actuarial condition 9 of the retirement system and the required contribution to the 10 retirement system. The actuary shall report to the legislature 11 by April 15 of each year on the actuarial condition of the 06560'00 TJS 2 1 retirement system as of the end of the previous fiscal year and 2 on the projections of state contributions for the next fiscal 3 year. The actuary shall certify in the report that the tech- 4 niques and methodologies used are generally accepted within the 5 actuarial profession and that the assumptions and cost estimates 6 used fall within the range of reasonable and prudent assumptions 7 and cost estimates. An annual actuarial gain-loss experience 8 study of the retirement system shall be made in order to deter- 9 mine the financial effect of variations of actual retirement 10 system experience from projected experience. 11 (2) The contribution rate for monthly benefits payable in 12 the event of the death of a member before retirement or the dis- 13 ability of a member shall be computed using a terminal funding 14 method of actuarial valuation. 15 (3) Except as otherwise provided in this subsection, the 16 contribution rate for benefits other than those provided for in 17 subsection (2), INCLUDING THOSE BENEFITS PROVIDED UNDER 18 SECTION 20D, shall be computed using an individual projected ben- 19 efit entry age normal cost method of valuation.For the 1995-9620state fiscal year and for each subsequent fiscal year, the con-21tribution rate for benefits provided under section 20d shall be22computed using a cash disbursement method.The contribution rate 23 for service that may be rendered in the current year, the normal 24 cost contribution rate, shall be equal to the aggregate amount of 25 individual entry age normal costs divided by 1% of the aggregate 26 amount of active members' valuation compensation. The unfunded 27 actuarial accrued liability shall be equal to the actuarial 06560'00 3 1 present value of benefits reduced by the actuarial present value 2 of future normal cost contributions and the actuarial value of 3 assets on the valuation date. The unfunded actuarial accrued 4 liability shall be amortized in accordance with generally 5 accepted governmental accounting standards over a period equal to 6 or less than 40 years. 7 (4) The legislature annually shall appropriate to the 8 retirement system the amount determined pursuant to subsections 9 (2) and (3). The state treasurer shall transfer monthly to the 10 retirement system an amount equal to the product of the contribu- 11 tion rates determined in subsections (2) and (3) times the aggre- 12 gate amount of active member compensation paid during that 13 month. Not later than 60 days after the termination of each 14 state fiscal year, the executive secretary of the retirement 15 board shall certify to the director of the department of manage- 16 ment and budget the actual aggregate compensations paid to active 17 members during the preceding state fiscal year. Upon receipt of 18 that certification, the director of the department of management 19 and budget shall compute the difference, if any, between actual 20 state contributions received during the preceding state fiscal 21 year and the product of the contribution rates determined in sub- 22 sections (2) and (3) times the aggregate compensations paid to 23 active members during the preceding state fiscal year. Except as 24 otherwise provided in subsection (5), the difference, if any, 25 shall be submitted in the executive budget to the legislature for 26 appropriation in the next succeeding state fiscal year. 06560'00 4 1 (5) For differences occurring in fiscal years beginning on 2 or after October 1, 1991, a minimum of 20% of the difference 3 between the estimated and the actual aggregate compensation and 4 the estimated and the actual contribution rate described in 5 subsection (4), if any, may be submitted in the executive budget 6 to the legislature for appropriation in the next succeeding state 7 fiscal year and a minimum of 25% of the remaining difference 8 shall be submitted in the executive budget to the legislature for 9 appropriation in each of the following 4 state fiscal years, or 10 until 100% of the remaining difference is submitted, whichever 11 first occurs. In addition, interest shall be included for each 12 year that a portion of the remaining difference is carried 13 forward. The interest rate shall equal the actuarially assumed 14 rate of investment return for the state fiscal year in which pay- 15 ment is made. 06560'00 Final page. TJS