September 13, 2005, Introduced by Rep. Wenke and referred to the Committee on Education.
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 2002 PA 94.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 41. (1) The annual level percentage of payroll
contribution rate to finance benefits being provided and to be
provided by the retirement system shall be determined by actuarial
valuation pursuant to subsection (2) upon the basis of the risk
assumptions that the retirement board and the department adopt
after consultation with the state treasurer and an 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. 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 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
valuation. Except
as otherwise provided in this subsection, the
The contribution rate for other benefits, including health
benefits, shall be computed using an individual projected benefit
entry
age normal cost method of valuation.
Except as otherwise
provided
in this section, for the 1995-96 state fiscal year and for
each
subsequent fiscal year, the contribution rate for health
benefits
provided under section 91 shall be computed using a cash
disbursement
method. For each fiscal year after the fiscal year in
which
the actuarial accrued liability for health benefits under
section
91 is at least 100% funded by the health advance funding
subaccount
created under section 34(2), the contribution rate for
health
benefits provided under section 91 shall be computed using
an
individual projected benefit entry age normal cost method of
valuation.
Beginning October 1, 2006,
the health benefits
prefunding account is established. Contributions for health
benefits shall be calculated using the individual projected benefit
entry age normal cost method and shall only be used to pay the
health benefits of members until the director of the department
certifies that the health benefits prefunding account is 100%
funded. Beginning October 1, 2006, no amounts shall be transferred
to the health advance funding subaccount created in section 34. The
contribution rate for service likely to be rendered in the current
year, the normal cost contribution rate, shall be equal to the
aggregate amount of individual projected benefit entry age normal
costs divided by 1% of the aggregate amount of active members'
valuation compensation. The contribution rate for unfunded service
rendered before the valuation date, the unfunded actuarial accrued
liability contribution rate, shall be the aggregate amount of
unfunded actuarial accrued liabilities divided by 1% of the
actuarial present value over a period not to exceed 50 years of
projected valuation compensation, where unfunded actuarial accrued
liabilities are 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.
(3) Before November 1 of each year, the executive secretary of
the retirement board shall certify to the director of the
department the aggregate compensation estimated to be paid public
school employees for the current state fiscal year.
(4) On the basis of the estimate under subsection (3), the
annual actuarial valuation, and any adjustment required under
subsection (6), the director of the department shall compute the
sum due and payable to the retirement system and shall certify this
amount to the reporting units.
(5) The reporting units shall make payment of the amount
certified under subsection (4) to the director of the department in
12 equal monthly installments.
(6) Not later than 90 days after termination of each state
fiscal year, the executive secretary of the retirement board shall
certify to the director of the department and each reporting unit
the actual aggregate compensation paid to public school employees
during the preceding state fiscal year. Upon receipt of that
certification, the director of the department shall compute any
adjustment required to the amount due to a difference between the
estimated and the actual aggregate compensation and the estimated
and the actual actuarial employer contribution rate. The
difference, if any, shall be paid as provided in subsection (9).
This subsection does not apply in a fiscal year in which a deposit
occurs pursuant to subsection (14).
(7) The director of the department may require evidence of
correctness and may conduct an audit of the aggregate compensation
that the director of the department considers necessary to
establish its correctness.
(8) A reporting unit shall forward employee and employer
social security contributions and reports as required by the
federal old-age, survivors, disability, and hospital insurance
provisions of title II of the social security act, chapter 531, 49
Stat.
620, 42 U.S.C. USC
401 to 405, 406 to 418, 420 to 423,
424a
to 426-1, and 427 to 433.
(9) For an employer of an employee of a local public school
district or an intermediate school district, for differences
occurring in fiscal years beginning on or after October 1, 1993, a
minimum of 20% of the difference between the estimated and the
actual aggregate compensation and the estimated and the actual
actuarial employer contribution rate described in subsection (6),
if any, shall be paid by that employer in the next succeeding state
fiscal year and a minimum of 25% of the remaining difference shall
be paid by that employer in each of the following 4 state fiscal
years, or until 100% of the remaining difference is submitted,
whichever first occurs. For an employer of other public school
employees, 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 actuarial employer contribution rate
described in subsection (6), if any, shall be paid by that employer
in the next succeeding state fiscal year and a minimum of 25% of
the remaining difference shall be paid by that employer 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 in a fiscal year in which a deposit occurs pursuant to
subsection (14).
(10) Beginning on the designated date, all assets held by the
retirement system shall be reassigned their fair market value, as
determined by the state treasurer, as of the designated date, and
in calculating any unfunded actuarial accrued liabilities, any
market gains or losses incurred before the designated date shall
not be considered by the retirement system's actuaries.
(11) Beginning on the designated date, the actuary used by the
retirement board shall assume a rate of return on investments of
8.00% per annum, as of the designated date, which rate may only be
changed with the approval of the retirement board and the director
of the department.
(12) Beginning on the designated date, the value of assets
used shall be based on a method that spreads over a 5-year period
the difference between actual and expected return occurring in each
year after the designated date and such methodology may only be
changed with the approval of the retirement board and the director
of the department.
(13) Beginning on the designated date, the actuary used by the
retirement board shall use a salary increase assumption that
projects annual salary increases of 4%. In addition to the 4%, the
retirement board shall use an additional percentage based upon an
age-related scale to reflect merit, longevity, and promotional
salary increase. The actuary shall use this assumption until a
change in the assumption is approved in writing by the retirement
board and the director of the department.
(14)
For fiscal years that begin on or after October 1, 2001,
if
the actuarial valuation prepared pursuant to this section
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
amount
based on the annual level percent of payroll contribution
rate
pursuant to subsections (1) and (2) may be deposited into the
health
advance funding subaccount created by section 34.
(14) (15)
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.