School and Local Government

State Senate Considers MORE Negative Changes to School Employee Retirement Plans

On December 3, 2014, the Senate K-12 Appropriations Subcommittee met to discuss the proposed legislation. The hearing consisted of testimony from Senator Mark Jansen’s staff and the Reason Foundation whose Board of Directors includes David Koch of Koch Industries (Koch Brothers). The Committee Chair refused to allow other testimony indicating there was not enough time. Mitch Bean, formerly of the Senate Fiscal Agency, was available to respond on public employees’ behalf. Bean is an expert in pension funding. The only highlight was two Republican Senators (Caswell and Papageorge) didn’t appear to be buying what the Reason Foundation and Senator Jansen were selling.

We will continue to actively oppose this legislation for what it is, another way to devalue public school employees and the work we do every day on behalf of the Citizens of Michigan.

Below is a brief summary of each Bill with a link for the full text of each Bill. All the Bills are all tie-barred together for passage as one package. The Senate Fiscal Agency analysis of all the Bills together is available here:


Senate Bill 722

The bill would allow local employers to designate their own Tier 2 (401k/457) contracts or providers or account plans instead of the 401k/457 plans administered by the Department of Technology, Management, and Budget, Office of Retirement Services, or ORS. An alternative retirement plan would have to offer the same benefits and vesting provisions but cannot contain a defined benefit option. More information is available at:


Senate Bill 723

The bill would allow for an entity other than ORS to administer Tier 2 plans and for an entity other than ORS to contract with personnel necessary to implement Tier 2 plans. More information is available at:


Senate Bill 724 (S-1)

For all service credit purchases other than military service, the bill would eliminate the option to purchase service credit beginning on the effective date of the bill. For the purchase of service credit for military service, the bill would require the amount charged for the purchase to be based on actuarial costs instead of the current requirement to pay 5% of salary for each year purchased. More information is available at:


Senate Bill 725

The bill would eliminate disability retirement allowances and duty disability retirement allowances for any member hired on or after July 1, 2014. More information is available at:


Senate Bill 726 (S-1)

The bill would provide for 90% health care (medical, dental, and vision) premium coverage for eligible retirants, beneficiaries, and dependents with household incomes below 133% of the Federal poverty level, instead of the current 80% coverage (unless a retiree was Medicare-eligible as of January 1, 2013, in which case coverage is 90%). The bill further would require the Department (i.e., ORS) to develop a method for the retirant, beneficiary, or dependent to prove income eligibility, and would direct ORS to use income tax returns as the basis for determining eligibility. More information is available at:


Senate Bill 727 (S-1)

The bill includes three major changes. The first relates to the closure of the existing hybrid (defined benefit and defined contribution, or DB and DC) retirement plan and its replacement with a defined contribution-only plan. The second would lower the rate cap that local units pay on the unfunded accrued liability (UAL) by one percentage point each year until the cap was lowered from the existing 20.96% of payroll to 9.96% of payroll. Finally, the bill would eliminate any possibility of the payment of a “13th check”. More information is available at:


Senate Bill 728

The bill would make the investment of an individual’s accumulated employer and employee contributions and earnings to one or more investment choices within available categories of investment provided by the Department subject to the provisions in Senate Bill 722. It also would allow a reporting unit to adopt an alternative retirement plan, other than those provided by the Department, and Senate Bill 728 would allow the investment of dollars in those alternative plans. More information is available at:

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