2017 Senate Bill 401 / Public Act 92

Overhaul school employee retirement system

Introduced in the Senate

May 23, 2017

Introduced by Sen. Phil Pavlov (R-25)

To close the current state-run school pension system to new employees hired after Sept. 30, 2017, who would instead get employer contributions to defined contribution 401k retirement savings accounts, or a lifetime annuity, which unlike the current pension system would come with a cap on the state's liability for benefits. The bill would also establish more rule-based funding requirements for the existing defined benefit systems. Inadequate annual contributions are reportedly responsible for the system’s unfunded liabilities having grown to $29.1 billion in 2016.

Referred to the Committee on Education

June 15, 2017

Reported without amendment

With the recommendation that the substitute (S-1) be adopted and that the bill then pass.

Amendment offered by Sen. Hoon-Yung Hopgood (D-6)

To make a provision that would gradually raise the starting age to collect benefits as life expectancies increase, to make it prospective only, applying just to employees hired starting in Feb. 2018.

The amendment failed 16 to 22 (details)

Amendment offered by Sen. Hoon-Yung Hopgood (D-6)

To delete a provision that would gradually raise the starting age to collect benefits (age 60) as life expectancies increase.

The amendment failed 13 to 25 (details)

Amendment offered by Sen. Hoon-Yung Hopgood (D-6)

The amendment failed 12 to 26 (details)

Amendment offered by Sen. Hoon-Yung Hopgood (D-6)

To require the state to perform an actuarial analysis of the status quo system that justifies replacing it with the one this bill would create.

The amendment failed 17 to 21 (details)

Amendment offered by Sen. Curtis Hertel (D-23)

To strip out a $5 million appropriation included in the bill that would make it "referendum-proof".

The amendment failed 14 to 24 (details)

Amendment offered by Sen. Curtis Hertel (D-23)

To require charter schools to contribute to the cost of paying down the school pension system's $29.1 billion in unfunded liabilities, even though their employees get no benefits from the pension system.

The amendment failed 14 to 24 (details)

Amendment offered by Sen. David Knezek (D-5)

To require any additional spending that happens because of this bill to come out of general tax revenue, rather than revenue earmarked to the state School Aid Fund.

The amendment failed 14 to 24 (details)

Passed in the Senate 21 to 17 (details)

To replace the current school pension system with one that requires more cost-sharing by new employees, and contains provisions intended to limit state management practices responsible for the $29.1 billion of unfunded liabilities in the status quo system. New employees could choose instead to receive substantial employer contributions to 401(k) accounts (4 percent of salary automatically, and an employer-match of up to 3 percent more). If the overhauled defined benefit component is not properly funded then employees who enrolled in it would have to pay half the cost of correcting this. If underfunding exceeds specified levels it would be closed to new hires.

Received in the House

June 20, 2017

Amendment offered by Rep. Martin Howrylak (R-41)

To authorize additional employer 401k contributions for certain employees.

The amendment failed by voice vote

Amendment offered by Rep. Martin Howrylak (R-41)

To revise details of the proposed allocation of unfunded liabilities the system may accrue.

The amendment failed by voice vote

Amendment offered by Rep. Martin Howrylak (R-41)

To revise details of the provision closing the system if it accrues more than a certain level of unfunded liabilities.

The amendment failed by voice vote

Passed in the House 55 to 51 (details)

To concur with the Senate-passed version of the bill, which is identical to the version the House voted on the previous week (House Bill 4647).

Signed by Gov. Rick Snyder

July 13, 2017