Brief Summary of the Senate Bills

Senate Bill 686 would create the Protecting Local Government Retirement and Benefits Act (the proposed Act) in Michigan law. The bill states that it is intended to reflect the findings and recommendations of the governor’s Responsible Retirement Reform for Local Government Task Force, which met from February to May of 2017.

Approximately one-third of the 1,856 general purpose governments in Michigan provide employees with post-retirement benefits-whether in the form of pension benefits or other post-employment benefits (OPEB), which principally include health care benefits, or both.

According to the task force’s July 2017 report, the total unfunded pension liability for local units in Michigan is estimated at $7.5 billion, and the total unfunded liability for retiree health care at $10 .1 billion.

Senate Bill 686 would do all of the following:

  • Require local units to pay the normal costs (prefund rather than pay-as-you-go) for employees first hired after June 30, 2018, as well as retiree premiums that are due for retirees in the retirement system.
  • Require local units to pay the normal costs (prefund rather than pay-as-you-go)) for employees first hired after June 30, 2018, as well as retiree premiums that are due for retirees in the retirement system.
  • Require the state treasurer to determine the underfunded status of each local unit’s retirement health system and retirement pension system, based on its funded ratio and the annual cost of making required payments as a percentage of local revenues.
  • Allow local units to apply for and receive a waiver of underfunded status if the state treasurer finds that the underfunded status is being addressed adequately.

To read the entire Legislative Analysis click HERE.

Legislative-Analysis

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