November 7, 2018, Introduced by Rep. VerHeulen and referred to the Committee on Appropriations.
A bill to amend 1992 PA 234, entitled
"The judges retirement act of 1992,"
by amending sections 301 and 604 (MCL 38.2301 and 38.2604), section
604 as amended by 2008 PA 514, and by adding sections 509a and
714a.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 301. (1) The retirement system shall direct the actuary
to do all of the following:
(a) Determine the annual level percent of payroll contribution
rate to finance the benefits provided under this act by actuarial
valuation
pursuant to under subsections (2) and (3), and upon on
the basis of the risk assumptions that the retirement board and the
department adopt after consultation with the state treasurer and
the actuary.
(b) Make an annual actuarial valuation of the retirement
system
in order to determine the actuarial condition of the
retirement system and the required contribution to the retirement
system.
(c) Make an annual actuarial gain-loss experience study of the
retirement
system in order to determine the financial effect of
variations of actual retirement system experience from projected
experience.
(2) The actuary shall compute the contribution rate for
monthly benefits payable in the event of death of a member before
retirement
or the disability of a member using a terminal funding
an individual projected benefit entry age normal cost method of
actuarial
valuation.
(3) The actuary shall compute the contribution rate for
benefits other than those described in subsection (2) using an
individual projected benefit entry age normal actuarial cost
method. The contribution rate for service that may be rendered in
the current year, known as the normal cost contribution rate, is
equal to the aggregate amount of individual entry age normal costs
divided by l% of the aggregate amount of active members' valuation
compensation.
The contribution rate for unfunded service rendered
on
or before the last day of the fiscal year, known as the unfunded
actuarial
accrued liability contribution rate, is equal to the
aggregate
amount of unfunded actuarial accrued liabilities divided
by
l% of the actuarial present value over a period not to exceed 40
years
of projected benefit compensation, where unfunded actuarial
accrued
liabilities are equal to the actuarial present value of
benefits
reduced by the actuarial present value of future normal
costs
and the actuarial value of assets on the last day of the
fiscal
year.Beginning with the
September 30, 2017 valuation, the
contribution rate for health benefits provided under sections 509
and 719 must be computed using an individual projected benefit
entry age normal cost method of valuation. The unfunded actuarial
accrued liability must be 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. Except as otherwise provided in this subsection,
the unfunded actuarial accrued liability must be amortized in
accordance with generally accepted governmental accounting
standards over a period equal to or less than 25 years, with the
payment schedule for the employer being based on and applied to the
combined payrolls of the employees who are Plan 1 members and Plan
2 members.
Sec. 509a. (1) For a member or qualified participant who is
not a Plan 1 member or Plan 2 member and is not eligible for any
future health insurance coverage premium from the retirement
system, a member's or qualified participant's employer shall make a
matching contribution up to 2% of the member's or qualified
participant's compensation to Tier 2. A matching contribution under
this subsection may not be used as the basis for a loan from that
member or qualified participant's Tier 2 account.
(2) A member or qualified participant as described in
subsection (1) may make a contribution up to 2% of the member's or
qualified participant's compensation to a Tier 2 account. A member
or qualified participant who makes a contribution under this
subsection may make additional contributions to his or her Tier 2
account as permitted by the department and the internal revenue
code.
(3) Except as otherwise provided in this subsection, a member
or qualified participant is vested in contributions made to his or
her Tier 2 account under subsections (1) and (2) according to the
vesting provisions under section 715.
(4) The contributions described in this section must begin
with the first payroll date after the member or qualified
participant is employed or after October 1, 2019, whichever is
later, and end on his or her termination of employment.
(5) As used in this section, "employer" means that term as
defined in section 705.
Sec.
604. (1) This section is enacted pursuant to under
section 401(a) of the internal revenue code, 26 USC 401, that
imposes certain administrative requirements and benefit limitations
for qualified governmental plans. This state intends that the
retirement system be a qualified pension plan created in trust
under section 401 of the internal revenue code, 26 USC 401, and
that the trust be an exempt organization under section 501 of the
internal revenue code, 26 USC 501. The department shall administer
the retirement system to fulfill this intent.
(2) The retirement system shall be administered in compliance
with the provisions of section 415 of the internal revenue code, 26
USC 415, and regulations under that section that are applicable to
governmental plans and beginning January 1, 2010, applicable
provisions
of the final regulations issued by the internal revenue
service
Internal Revenue Service on April 5, 2007. Employer-
financed benefits provided by the retirement system under this act
shall
must not exceed the applicable limitations set forth in
section 415 of the internal revenue code, 26 USC 415, as adjusted
by the commissioner of internal revenue under section 415(d) of the
internal revenue code, 26 USC 415, to reflect cost-of-living
increases, and the retirement system shall adjust the benefits,
including benefits payable to retirants and retirement allowance
beneficiaries, subject to the limitation each calendar year to
conform with the adjusted limitation. For purposes of section
415(b) of the internal revenue code, 26 USC 415, the applicable
limitation
shall apply applies to aggregated benefits received from
all qualified pension plans for which the office of retirement
services coordinates administration of that limitation. If there is
a conflict between this section and another section of this act,
this section prevails.
(3)
The assets of the retirement system shall must be held in
trust and invested for the sole purpose of meeting the legitimate
obligations
of the retirement system and shall must not be used for
any
other purpose. The assets shall must
not be used for or
diverted to a purpose other than for the exclusive benefit of the
members, vested former members, retirants, and retirement allowance
beneficiaries before satisfaction of all retirement system
liabilities.
(4) The retirement system shall return post-tax member
contributions made by a member and received by the retirement
system
to a member upon on retirement, pursuant to internal revenue
service
under Internal Revenue
Service regulations and approved
internal
revenue service under
Internal Revenue Service exclusion
ratio tables.
(5) The required beginning date for retirement allowances and
other
distributions shall must not be later than April 1 of the
calendar year following the calendar year in which the employee
attains age 70-1/2 or April 1 of the calendar year following the
calendar year in which the employee retires. The required minimum
distribution requirements imposed by section 401(a)(9) of the
internal
revenue code, 26 USC 401, shall apply to this act and must
be administered in accordance with a reasonable and good faith
interpretation of the required minimum distribution requirements
for all years in which the required minimum distribution
requirements apply to this act.
(6) If the retirement system is terminated, the interest of
the members, vested former members, retirants, and retirement
allowance beneficiaries in the retirement system is nonforfeitable
to the extent funded as described in section 411(d)(3) of the
internal revenue code, 26 USC 411, and related internal revenue
service regulations applicable to governmental plans.
(7) Notwithstanding any other provision of this act to the
contrary that would limit a distributee's election under this act,
a distributee may elect, at the time and in the manner prescribed
by the retirement board, to have any portion of an eligible
rollover distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover. This subsection
applies
to distributions made on or after January 1, 1993.December
31, 1992. Beginning October 1, 2010, a nonspouse beneficiary may
elect to have any portion of an amount payable under this act that
is an eligible rollover distribution treated as a direct rollover
that will be paid in a direct trustee-to-trustee transfer to an
individual retirement account or individual retirement annuity
described in section 408(a) or (b) of the internal revenue code, 26
USC 408, that is established for the purpose of receiving a
distribution on behalf of the beneficiary and that will be treated
as an inherited individual retirement account or individual
retirement annuity pursuant to section 402(c)(11) of the internal
revenue code, 26 USC 402.
(8) For purposes of determining actuarial equivalent
retirement allowances under sections 506(1)(a) and (b) and 602, the
actuarially
assumed interest rate shall be is
8% with utilization
of the 1983 group annuity and mortality table.
(9) Notwithstanding any other provision of this act, the
compensation
of a member of the retirement system shall must be
taken into account for any year under the retirement system only to
the extent that it does not exceed the compensation limit
established in section 401(a)(17) of the internal revenue code, 26
USC 401, as adjusted by the commissioner of internal revenue. This
subsection
applies to any person an
individual who first becomes a
member
of the retirement system on or after October 1, September
30, 1996.
(10) Notwithstanding any other provision of this act,
contributions, benefits, and service credit with respect to
qualified military service will be provided under the retirement
system in accordance with section 414(u) of the internal revenue
code, 26 USC 414. This subsection applies to all qualified military
service
on or after December 12, 11,
1994. Beginning on January 1,
2007, in accordance with section 401(a)(37) of the internal revenue
code, 26 USC 401, if a member dies while performing qualified
military service, for purposes of determining any death benefits
payable
under this act, the member shall be is treated as having
resumed and then terminated employment on account of death.
Sec. 714a. Tier 2 and tax-deferred accounts are subject to the
following terms and conditions:
(a) Before April 2, 2019, the retirement system shall design
an automatic enrollment feature that provides that unless a
qualified participant who makes contributions under section 714(3)
or who makes a contribution under section 509a(2) elects to
contribute a lesser amount, the qualified participant shall
contribute the amount required to qualify for all eligible matching
contributions under this act. The retirement system shall implement
this automatic enrollment feature as soon as administratively
feasible, but no later than 12 months after the enactment of the
amendatory act that added this section.
(b) In addition to elective employee contributions to Tier 2
or a tax-deferred account, this state may use elective employee
contributions to the state 457 deferred compensation plan as a
basis for making employer matching contributions to Tier 2 or a
tax-deferred account.
(c) Employer matching contributions do not have to be made to
the same plan or account to which the elective employee
contributions were contributed as the basis for the matching
contributions.
(d) Elective employee contributions may not be used as the
basis for more than an equivalent amount of employer matching
contributions.
(e) The retirement system shall design and implement a method
to determine the proper allocation of employer matching
contributions based on elective employee contributions as provided
in this section.