Thursday, July 18, 2019

Legislative

Quick Links:

Public Act 202 of 2017

Public Act 152

Public Act 530 of 2017 - Compliance Guide (for FY 2018)

MERS is an independent, professional retirement services company operating on a not-for-profit basis. Partnering with municipalities and their employees all across the state, offering customized, sustainable retirement solutions. We listen to our members and understand the fiscal challenges municipalities are facing, as well as the legislative issues affecting the state, and the state of retirement today.

This section of our site is designed to be a resource for some key issues affecting our municipal partners. Please check back for further updates and resources as they become available.

 

 

Protecting Local Government Retirement Benefits Act (PA 202 of 2017)

In 2017, the Protecting Local Government Retirement and Benefits Act (Public Act 202 of 2017) was signed into law in Michigan. The legislation implemented recommendations from the Responsible Retirement Reform Task Force on addressing unfunded pension and retiree health care liabilities (OPEB) of local governments in Michigan. If your local unit of government does not offer a defined benefit retirement or retiree health plan, or only offers a defined contribution plan, such as a 401(a) or 457(b) plan, no action is required under the law.

This act incorporates four stages for local units to use in addressing their fiscal health and the security of retirement benefits for retired municipal employees:

Overview of the Four Stages

Stage 1: Transparency, Through Reporting Requirements

Increased Information
Treasury has streamlined retirement system reporting for Fiscal Year 2019 by merging Form 5572 with the summary pension report, which was required under Public Act 530 of 2016 (PA 530). This eliminates the PA 530 report that was previously required. Uniform actuarial assumption information as well as data for summary retiree health care reporting is now also requested in the Form 5572 as required by PA 202 of 2017. View the reporting forms and instruction information.

As required by Public Act 202, the state treasurer has established uniform actuarial assumptions which will be used for future reporting purposesView the uniform assumptions. Reporting using these uniform assumptions take effect for the fiscal year 2019 using Form 5572 (Retirement System Annual Report). 

** To assist our customers with the reporting requirements we will be creating an updated compliance guide to provide information for the Retirement System, and to guide you to where you can find your plan specific information in the 12/31/18 Annual Actuarial Valuations (delivered by June 30th, 2019). It is important to note that MERS does not have any of the required OPEB information.

When to File Form 5572

Timeline

Fiscal year End Month (FYE) Fiscal year 18 Due Date Fiscal year 19 Due Date
January 7/31/2018 7/31/2019
February 8/31/2018 9/3/2019*
March 10/1/2018* 9/30/2019
April 10/31/2018 10/31/2019
May 11/30/2018 12/2/2019*
June 1/2/2019* 1/2/2020*
July 1/31/2019 1/31/2020
August 2/28/2019 3/2/2020*
September 4/1/2019* 3/31/2020
October 4/30/2019 4/30/2020
November 5/31/2019 6/1/2020*
December 7/1/2019* 6/30/2020
*The deadline for filing falls on a state holiday or weekend, ergo the due date has been extended.

The Retirement System Annual Report must be submitted no later than six months after the end of your fiscal year.

It is important to note that the current data requested can be located in your local government's most recent financial report. As a reminder of how Net Pension Liability is calculated, please see our resource page.

Increased Transparency
Treasury and local units of government are required to post on their respective websites a summary of local units' reports, the funded status, the waiver status, and approved corrective action plans.

Treasury's website can be found here.

Actuarial Due Diligence
Beginning July 1, 2018, local units are required to conduct an actuarial experience study at least every five years, with a peer actuarial audit or rotation of actuaries at least every eight years. For MERS customers, this due diligence is already conducted on your behalf and as part of the overall administration of your plan in MERS. Please visit our website for more information on the Experience Study, as well as view the Actuarial Policy.

A local unit of government that is eligible to use a specified alternative measurement method under Governmental Accounting Standards Board standards is exempt from the requirements.

Funding Requirements
As of July 1, 2018, in addition to meeting the current constitutional and statutory requirements for funding pension plans, going forward, all local governments should begin to fund normal costs for employees first hired after June 30, 2018 and any retiree premiums that are due for retiree health plans.

MERS currently has over 300 local governments that utilize our Section 115 Governmental Integral Part Trust. This qualified medical trust provides cost-effective diversified investment options. For more information on MERS Retiree Health Funding Vehicle, click here.

Stage 2: Identify Potential Problems

A critical stage of this process is identifying where problems exist. Each year, the state treasurer shall determine the underfunded status of each local unit of government using the following criteria:

  1. Pension Funding Level:
    For primary units of government (cities, villages, townships, or counties), a determination of "underfunded status" is made if the plan total assets are less than 60% of the plan total liabilities (assets/liabilities < 60%) and the actuarially determined contribution (ADC) is greater than 10% of total governmental fund revenues (ADC/Revenues > 10%).
     
    For authorities, districts, and other local non-primary units of governments, a determination of "underfunded status" is made if the plan total assets are less than 60% of the plan total liabilities (assets/liabilities < 60%).
     
  2. OPEB Funding Level:
    For primary units of government (cities, villages, townships, or counties), a determination of "underfunded status" is made if the plan total assets are less than 40% of the plan total liabilities (assets/liabilities < 40%) and the annual required contribution (ARC) is greater than 12% of total governmental fund revenues (ARC/Revenues > 12%).
     
    For authorities, districts, and other local non-primary units of governments, a determination of "underfunded status" is made if the plan total assets are less than 40% of the plan total liabilities (assets/liabilities < 40%).

Treasury will also monitor and address cases in which local units of government:

  1. Do not submit required funding reports.
  2. Fail to fund OPEB normal costs for employees first hired after June 30, 2018 and any retiree premiums that are due.

Stage 3: Review For Fiscal Health (Waiver Process)

If the local unit is under preliminary review for being in underfunded status as outlined in Stage 2, but already has a plan in place for how they will continue to fund their plan over time, they may file an application for waiver to Treasury within 45 days of notification of underfunded status.

To assist you in completing a waiver, MERS has put together a Waiver Completion Guide for where you can find the various cost-reducing strategies and impacts you have, or may consider, implementing. Please contact your Regional Manager for additional information.

This plan must be approved by the local unit's administrative officer and governing body, to ensure support. The state treasurer shall issue a waiver of the determination of underfunded status for a local unit of government if it is determined that the underfunded status is adequately being addressed by the local unit of government.

If a waiver is not requested or is requested but not approved, Treasury will confirm that a problem exists and the local unit moves to Stage 4.

Stage 4: Develop a Corrective Action Plan

An underfunded local unit of government as identified under Stage 3 shall develop and submit for approval to a newly created Municipal Stability Board (MSB) a Corrective Action Plan (CAP). The local unit of government shall determine the components of the CAP and may be based on the MSB list of best practices. The MSB will consist of three members appointed by the Governor. This board will be comprised of appointed members representing state and local officials, as well as employee/ retiree representative(s).

Process

  • A local unit of government that is in underfunded status shall submit a CAP to the board within 180 days after the determination of underfunded status is made.
  • The MSB may extend the 180-day deadline by up to an additional 45 days if the local unit of government submits a reasonable draft of a CAP and requests an extension.
  • The MSB shall review and vote on the approval of a CAP within 45 days after it is submitted.
  • If the MSB votes to disapprove a CAP, the board shall provide notification to the local unit of government detailing the reasons for the disapproval within 15 days.
  • The local unit of government has 60 days from the date of the notification to address the reasons for disapproval and resubmit a CAP.

The local unit of government has up to 180 days after the approval of a CAP to begin implementation of the approved action(s).

Overview of PA-152, and Road Commission Best Practice Bills


 

  • Overview of PA 51—Road Commissions Best Practices Bill
    The Road Commissions Best Practice Bill affects any municipality that receives funding from Act 51 Transportation Funds. This law requires a municipality to choose between complying with an employee compensation plan — which mirrors the fiscal year 2013 EVIP/CIP employee compensation criteria requirements OR compliance with PA 152.
    View PA 51 information
     
  • Overview of 2011 PA 152
    In 2011, the State of Michigan passed Public Act 152, which requires that local units of government place a hard cap on their health care, institute an 80/20 cost sharing arrangement or opt out with 2/3 vote of the governing body.
    View PA 152 information
     
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Disclaimer
The information contained in this Web site is being made available as a public service. The information is not intended to constitute legal or investment advice, or to replace official versions of that information. Benefit Estimates or Service Credit Purchase estimates requested through this Web site are not official descriptions of any benefits, and do not represent a promise by MERS to provide any benefit(s) to any person(s). No one can detrimentally rely upon the information provided in, or requested through this Web site. MERS reserves the right to correct any errors, and presents this information without warranties, express or implied, regarding the information?s accuracy, timeliness or completeness. If you believe the information is inaccurate, out-of-date, or incomplete, or if you have problems accessing or reading the information, please call MERS at 800.767.MERS (6377).