HOUSE BILL No. 5880


     June 8, 2000, Introduced by Reps. Schauer, Hanley, Kilpatrick, Woodward, Dennis, Jacobs, Switalski, Baird, Spade, Mans,
O'Neil, Lockwood, Callahan, Clarke, Jamnick, Minore, Gieleghem, Wojno, Garza, Sheltrown, Hardman, Cherry, Martinez, Brater,
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 1980 PA 300, entitled

   "The public school employees retirement act of 1979,"

   by amending section 41 (MCL 38.1341), as amended by 1997 PA 143.

               THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

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           Sec. 41.  (1) The annual level percentage of payroll contri-

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      bution rate to finance benefits being provided and to be provided

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      by the retirement system shall be determined by actuarial valua-

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      tion pursuant to subsection (2) upon the basis of the risk

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      assumptions that the retirement board and the department adopt

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      after consultation with the state treasurer and an actuary.  An

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      annual actuarial valuation shall be made of the retirement system

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      in order to determine the actuarial condition of the retirement

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      system and the required contribution to the retirement system.

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      An annual actuarial gain-loss experience study of the retirement

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      system shall be made in order to determine the financial effect


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      of variations of actual retirement system experience from

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      projected experience.

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           (2) The contribution rate for benefits payable in the event

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      of the death of a member before retirement or the disability of a

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      member shall be computed using a terminal funding method of

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      valuation.  Except as otherwise provided in this subsection,

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      the  THE contribution rate for other benefits, INCLUDING HEALTH

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      BENEFITS, shall be computed using an individual projected benefit

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      entry age normal cost method of valuation.  For the 1995-96

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      state fiscal year and for each subsequent fiscal year, the con-

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      tribution rate for health benefits provided under section 91

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      shall be computed using a cash disbursement method.  The contri-

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      bution rate for service likely to be rendered in the current

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      year, the normal cost contribution rate, shall be equal to the

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      aggregate amount of individual projected benefit entry age normal

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      costs divided by 1% of the aggregate amount of active members'

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      valuation compensation.  The contribution rate for unfunded serv-

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      ice rendered before the valuation date, the unfunded actuarial

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      accrued liability contribution rate, shall be the aggregate

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      amount of unfunded actuarial accrued liabilities divided by 1% of

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      the actuarial present value over a period not to exceed 50 years

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      of projected valuation compensation, where unfunded actuarial

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      accrued liabilities are equal to the actuarial present value of

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      benefits, reduced by the actuarial present value of future normal

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      cost contributions and the actuarial value of assets on the valu-

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      ation date.





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           (3) Before November 1 of each year, the executive secretary

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      of the retirement board shall certify to the director of the

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      department the aggregate compensation estimated to be paid public

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      school employees for the current state fiscal year.

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           (4) On the basis of the estimate under subsection (3), the

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      annual actuarial valuation, and any adjustment required under

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      subsection (6), the director of the department shall compute the

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      sum due and payable to the retirement system and shall certify

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      this amount to the reporting units.

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           (5) The reporting units shall make payment of the amount

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      certified under subsection (4) to the director of the department

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      in 12 equal monthly installments.

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           (6) Not later than 90 days after termination of each state

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      fiscal year, the executive secretary of the retirement board

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      shall certify to the director of the department and each report-

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      ing unit the actual aggregate compensation paid to public school

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      employees during the preceding state fiscal year.  Upon receipt

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      of that certification, the director of the department shall com-

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      pute any adjustment required to the amount due to a difference

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      between the estimated and the actual aggregate compensation and

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      the estimated and the actual actuarial employer contribution

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      rate.  The difference, if any, shall be paid as provided in

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      subsection (9).

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           (7) The director of the department may require evidence of

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      correctness and may conduct an audit of the aggregate compensa-

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      tion that the director of the department considers necessary to

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      establish its correctness.



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           (8) A reporting unit shall forward employee and employer

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      social security contributions and reports as required by the fed-

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      eral old-age, survivors, disability, and hospital insurance pro-

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      visions of title II of the social security act, chapter 531, 49

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      Stat. 620, 42 U.S.C. 401 to 405, 406 to 418, 420 to 423, 424a to

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      426-1, and 427 to 433.

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           (9) For an employer of an employee of a local public school

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      district or an intermediate school district, for differences

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      occurring in fiscal years beginning on or after October 1, 1993,

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      a minimum of 20% of the difference between the estimated and the

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      actual aggregate compensation and the estimated and the actual

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      actuarial employer contribution rate described in subsection (6),

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      if any, shall be paid by that employer in the next succeeding

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      state fiscal year and a minimum of 25% of the remaining differ-

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      ence shall be paid by that employer in each of the following

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      4 state fiscal years, or until 100% of the remaining difference

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      is submitted, whichever first occurs.  For an employer of other

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      public school employees, for differences occurring in fiscal

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      years beginning on or after October 1, 1991, a minimum of 20% of

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      the difference between the estimated and the actual aggregate

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      compensation and the estimated and the actual actuarial employer

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      contribution rate described in subsection (6), if any, shall be

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      paid by that employer in the next succeeding state fiscal year

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      and a minimum of 25% of the remaining difference shall be paid by

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      that employer in each of the following 4 state fiscal years, or

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      until 100% of the remaining difference is submitted, whichever

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      first occurs.  In addition, interest shall be included for each



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      year that a portion of the remaining difference is carried

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      forward.  The interest rate shall equal the actuarially assumed

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      rate of investment return for the state fiscal year in which pay-

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      ment is made.

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           (10) Beginning on the designated date, all assets held by

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      the retirement system shall be reassigned their fair market

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      value, as determined by the state treasurer, as of the designated

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      date, and in calculating any unfunded actuarial accrued liabili-

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      ties, any market gains or losses incurred before the designated

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      date shall not be considered by the retirement system's

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      actuaries.

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           (11) Beginning on the designated date, the actuary used by

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      the retirement board shall assume a rate of return on investments

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      of 8.00% per annum, as of the designated date, which rate may

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      only be changed with the approval of the retirement board and the

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      director of the department.

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           (12) Beginning on the designated date, the value of assets

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      used shall be based on a method that spreads over a 5-year period

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      the difference between actual and expected return occurring in

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      each year after the designated date and such methodology may only

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      be changed with the approval of the retirement board and the

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      director of the department.

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           (13) Beginning on the designated date, the actuary used by

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      the retirement board shall use a salary increase assumption that

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      projects annual salary increases of 4%.  In addition to the 4%,

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      the retirement board shall use an additional percentage based

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      upon an age-related scale to reflect merit, longevity, and



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      promotional salary increase.  The actuary shall use this

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      assumption until a change in the assumption is approved in writ-

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      ing by the retirement board and the director of the department.


















































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