HB-4512, As Passed Senate, May 22, 2007
March 22, 2007, Introduced by Reps. Gonzales, Cushingberry and Alma Smith and referred to the Committee on Appropriations.
A bill to amend 1943 PA 240, entitled
"State employees' retirement act,"
by amending section 38 (MCL 38.38), as amended by 2002 PA 93.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 38. (1) The annual level percent of payroll contribution
rate to finance the benefits provided under this act shall be
determined by actuarial valuation pursuant to subsections (2) and
(3), upon the basis of the risk assumptions adopted by the
retirement board with approval of the department of management and
budget, and in consultation with the investment counsel and the
actuary. An annual actuarial valuation shall be made of the
retirement system in order to determine the actuarial condition of
the retirement system and the required contribution to the
retirement system. The actuary shall report to the legislature by
April 15 of each year on the actuarial condition of the retirement
system as of the end of the previous fiscal year and on the
projections of state contributions for the next fiscal year. The
actuary shall certify in the report that the techniques and
methodologies used are generally accepted within the actuarial
profession and that the assumptions and cost estimates used fall
within the range of reasonable and prudent assumptions and cost
estimates. An annual actuarial gain-loss experience study of the
retirement system shall be made in order to determine the financial
effect of variations of actual retirement system experience from
projected experience.
(2) The contribution rate for monthly benefits payable in the
event of the death of a member before retirement or the disability
of a member shall be computed using a terminal funding method of
actuarial valuation.
(3) Except as otherwise provided in this subsection, the
contribution rate for benefits other than those provided for in
subsection (2) shall be computed using an individual projected
benefit entry age normal cost method of valuation. For the 1995-96
state fiscal year and for each subsequent fiscal year in which the
actuarial accrued liability for health benefits is less than 100%
funded, the contribution rate for benefits provided under section
20d shall be computed using a cash disbursement method. Beginning
in the fiscal year after the fiscal year in which the actuarial
accrued liability for health benefits under section 20d is at least
100% funded by the health advance funding subaccount created under
section 11(9), and continuing for each subsequent fiscal year, the
contribution rate for health benefits provided under section 20d
shall be computed using an individual projected benefit entry age
normal cost method of valuation. The contribution rate for service
that may be rendered in the current year, the normal cost
contribution rate, shall be equal to the aggregate amount of
individual entry age normal costs divided by 1% of the aggregate
amount of active members' valuation compensation. The unfunded
actuarial accrued liability shall be equal to the actuarial present
value of benefits reduced by the actuarial present value of future
normal cost contributions and the actuarial value of assets on the
valuation
date. The Except as
otherwise provided in this
subsection, the unfunded actuarial accrued liability shall be
amortized in accordance with generally accepted governmental
accounting standards over a period equal to or less than 40 years.
For the fiscal year that begins on October 1, 2006 only, the
contribution for the unfunded actuarial accrued liability shall be
equal to 4.5% of the unfunded actuarial accrued liability.
(4) The legislature annually shall appropriate to the
retirement system the amount determined pursuant to subsections (2)
and (3). The state treasurer shall transfer monthly to the
retirement system an amount equal to the product of the
contribution rates determined in subsections (2) and (3) times the
aggregate amount of active member compensation paid during that
month. Not later than 60 days after the termination of each state
fiscal year, the executive secretary of the retirement board shall
certify to the director of the department of management and budget
the actual aggregate compensations paid to active members during
the preceding state fiscal year. Upon receipt of that
certification, the director of the department of management and
budget shall compute the difference, if any, between actual state
contributions received during the preceding state fiscal year and
the product of the contribution rates determined in subsections (2)
and (3) times the aggregate compensations paid to active members
during the preceding state fiscal year. Except as otherwise
provided in subsection (5), the difference, if any, shall be
submitted in the executive budget to the legislature for
appropriation in the next succeeding state fiscal year. This
subsection does not apply for those fiscal years in which a deposit
occurs pursuant to subsection (6).
(5) For differences occurring in fiscal years beginning on or
after October 1, 1991, 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
(4), 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 shall 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 shall be included for each year
that a portion of the remaining difference is carried forward. The
interest rate shall equal the actuarially assumed rate of
investment return for the state fiscal year in which payment is
made. This subsection does not apply for those fiscal years in
which a deposit occurs pursuant to subsection (6).
(6) For each fiscal year that begins on or after October 1,
2001, if the actuarial valuation prepared pursuant to this section
for each fiscal year demonstrates that as of 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 annual level percent of payroll contribution rate as
determined pursuant to subsections (1), (2), and (3) may be
deposited into the health advance funding subaccount created under
section 11(9).
(7) 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, the benefits that are required to be paid from that fund shall
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 shall 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.