HB-5230, As Passed Senate, December 20, 2018

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 5230

     A bill to amend 1980 PA 300, entitled

"The public school employees retirement act of 1979,"

by amending section 127 (MCL 38.1427), as amended by 2017 PA 92.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 127. (1) Each qualified participant, former qualified

participant, and refund beneficiary shall direct the investment of

the individual's accumulated employer and employee contributions

and earnings to 1 or more investment choices within available

categories of investment provided by the department. The

limitations on the percentage of total assets for investments

provided in the public employee retirement system investment act,

1965 PA 314, MCL 38.1132 to 38.1141, do not apply to Tier 2.

     (2) In addition to the categories of investment provided by

the department under subsection (1), the retirement system shall

offer access to 1 or more fixed annuity options and 1 or more

variable annuity options. While a qualified participant is employed

by a reporting unit, the annuity options offered under this

subsection must allow a qualified participant the ability to

purchase a fixed rate annuity and may allow the option to purchase

a variable rate annuity. The annuity options offered under this

subsection must allow a qualified participant the ability to

purchase an annuity while the qualified participant is employed by

a reporting unit. Subject to subsection (4), the state treasurer

shall select 2 or more annuity providers based on a competitive

proposal process. Subject to subsection (4), the state treasurer

shall contract with 2 or more annuity providers to provide the

annuity options under this subsection. The state treasurer shall

select and contract with an annuity provider that meets all of the

following conditions, as determined by the state treasurer:

     (a) The annuity provider and its subsidiaries and affiliates

have the appropriate financial strength and stability. In

determining the financial strength and stability under this

subdivision, the state treasurer shall obtain written

representation from the annuity provider of all of the following:

     (i) That the annuity provider is an authorized insurer as that

term is defined in section 108 of the insurance code of 1956, 1956

PA 218, MCL 500.108.

     (ii) That all of the following apply to the annuity provider,

at the time of selection and for each of the immediately preceding

5 years:

     (A) The annuity provider operates under a certificate of

authority from the insurance commissioner of its domiciliary state

that has not been revoked or suspended.

     (B) The annuity provider has filed audited financial

statements in accordance with the laws of its domiciliary state

under applicable statutory accounting principles.

     (C) The annuity provider maintains and has maintained reserves

that satisfy the statutory requirements of each state where the

annuity provider does business.

     (D) The annuity provider is not operating under an order of

rehabilitation or liquidation.

     (iii) That the annuity provider undergoes, at least every 5

years, a financial examination, within the meaning of the law of

its domiciliary state, by the insurance commissioner of the

domiciliary state or representative, designee, or other party

approved by the insurance commissioner of the domiciliary state.

     (iv) That the annuity provider will notify the retirement

system of any change in circumstances occurring after the

representations made in subparagraphs (i), (ii), and (iii) that

would preclude the annuity provider from making the representations

at the time the annuity provider issues the annuity.

     (b) The annuity provider is able to provide contracted rights

and benefits to a qualified participant.

     (c) The costs, including fees and commissions, of the annuity

options in relation to the benefits and product features of the

annuity option are reasonable.

     (d) The administrative services to be provided under the

annuity option are appropriate. At a minimum, the administrative

services must include periodic reports to the state treasurer about

all of the following:

     (i) The number of annuitants.

     (ii) The types of annuities provided.

     (iii) Any other information that the state treasurer may

require.

     (e) The annuity provider is experienced in paying lifetime

retirement income through annuities offered to public employee

defined contribution retirement plans.

     (f) The annuity provider offers annuity options that meet all

of the following conditions:

     (i) The annuity options are suitable for qualified

participants, former qualified participants, and refund

beneficiaries.

     (ii) The contract terms and income benefits are clearly

stated, based on reasonable assumptions.

     (iii) The annuity options offer a range of lifetime income

options.

     (iv) If the annuity is a variable annuity, the annuity offers

a fixed account option along with its variable account options.

     (g) The annuity provider is able to offer objective and

participant-specific education and tools that help participants

understand the appropriate use of annuities as a long-term

retirement savings vehicle.

     (3) The office of retirement services shall verify the

information in a report submitted under subsection (2)(d). A report

submitted under subsection (2)(d) must be published on the office

of retirement services's website.

     (4) After the competitive proposal process under subsection

(2) is complete, the state treasurer may select and contract with

only 1 annuity provider to provide annuity options to qualified

participants under subsection (2) if either of the following

applies:

     (a) The state treasurer determines that selecting more than 1

annuity provider is not in the interests of qualified participants.

     (b) Only 1 annuity provider meets the conditions under

subsection (2).

     (5) If the state treasurer selects only 1 annuity provider to

provide annuity options under subsection (2) as provided in

subsection (4), the state treasurer shall notify the speaker of the

house of representatives, the minority leader of the house of

representatives, the senate majority leader, and the senate

minority leader within 30 days after selecting and contracting with

an annuity of the reasons for selecting only 1 annuity provider.

     Enacting section 1. This amendatory act takes effect 120 days

after the date it is enacted into law.

     Enacting section 2. This amendatory act does not take effect

unless House Bill No. 5231 of the 99th Legislature is enacted into

law.