Michigan Legislature Passes “Protecting Local Government Retirement and Benefits Act”

On December 12, 2017, the Michigan Legislature passed a package of Bills to amend various public sector retirement statutes and to create the “Protecting Local Government Retirement and Benefits Act.” The package is expected to be signed by the Governor before the end of 2017. The “Protecting Local Government Retirement and Benefits Act” (SB 686) as passed by the Senate and House places certain funding requirements on local municipalities, as well as reporting requirements regarding the funding of retirement health benefits and retirement pension benefits. There are additional funding requirements retirement health provided to new hires effective in 2018. Additionally, municipalities will have to comply with particular actuarial requirements, including periodic actuarial studies.

Municipalities will be required to submit annual reports that will be subject to a Treasurer imposed evaluation system. The evaluation system will provide for review and oversight of the underfunded status of municipalities, as well as review and approval of corrective action plans for underfunded municipalities. Retirement health systems that are less than 40% funded with an annually required contribution greater than 12% of the annual general fund operating revenues will be deemed underfunded, and retirement pension systems that are less than 60% funded with an annually required contribution greater than 10% of the annual general fund operating revenues will be deemed underfunded. The corrective action plans may include closing current defined benefit plans, implementing a multiplier limit, reducing or eliminating new accrued benefits, and implementing final average compensation standards for pension plans; and requiring cost sharing of premiums and sufficient copays, as well as capping employer costs in regard to retirement health benefits. There are additionally posting requirements for municipalities to comply with. As always, changes to retirement benefits for represented units will be subject to negotiation.

Please feel free to contact a Keller Thoma attorney at (313) 965-7610 with any questions.

Categories: Uncategorized

For More Information

Fill out our online form