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2012 Senate Bill 1040: Revise school pension system

Public Act 300 of 2012

  1. Introduced by Sen. Roger Kahn (R) on March 22, 2012, to require school employees to contribute at least 5 percent of their compensation toward the cost of funding their future pension benefits; require current and future retirees to contribute 20 percent to their health insurance benefits (payment of which is optional for the state); cap the final salary amount used in the pension calculation formula at $100,000; and more.
    • Referred to the Senate Appropriations Committee on March 22, 2012.
      • Reported in the Senate on May 16, 2012.
    • Substitute offered in the Senate on May 17, 2012, to replace the previous version of the bill with one with substantive changes; see Senate-passed bill for details. The substitute passed by voice vote in the Senate on May 17, 2012.
    • Amendment offered by Sen. Patrick Colbeck (R) on May 17, 2012, to exclude any "merit pay" amounts a teacher receives from a proposed $100,000 cap on employee final salary used in the formula used to calculate pension benefits for some school employees. The amendment passed by voice vote in the Senate on May 17, 2012.
    • Amendment offered by Sen. Glenn Anderson (D) on May 17, 2012, to strip out a provision requiring current and future school retirees to pay 20 percent of the health insurance benefit they receive. Under current law the required contribution is 10 percent. The amendment failed 19 to 19 in the Senate on May 17, 2012.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Sen. Rebekah Warren (D) on May 17, 2012, to use money in the state "rainy day fund" to prefund (optional) public school retiree health insurance benefits. Reportedly prefunding would cost around $500 million annually. The "rainy day fund" had a balance of $2.2 million as of September 30, 2011. The amendment failed 12 to 26 in the Senate on May 17, 2012.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Sen. Hoon-Yung Hopgood (D) on May 17, 2012, to mandate that charter school employees be enrolled in the "defined benefit" school pension system. Almost all charter schools provide employees with "defined contribution" 401(k) type benefits. The amendment failed 12 to 26 in the Senate on May 17, 2012.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Sen. Vincent Gregory (D) on May 17, 2012, to make higher employer pension contributions to employees whose annual compensation is less than $15,000. The amendment failed 15 to 23 in the Senate on May 17, 2012.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Sen. Gretchen Whitmer (D) on May 17, 2012, to strip out a provision that would end post-retirement health insurance benefits for new school employees hired starting in 2013, and instead make annual contributions sufficient to prefund these benefits (which under current law are optional and can be cut or eliminated at any time). Reportedly the annual prefunding amount would be around $500 million. Last year, providing these optional benefits to current retirees cost state taxpayers $795 million. The amendment failed 18 to 20 in the Senate on May 17, 2012.
      Who Voted "Yes" and Who Voted "No"

  2. Passed 20 to 18 in the Senate on May 17, 2012, to close the current "defined benefit" pension system to new school employees hired starting in 2013, and instead provide 401(k) accounts with employer contributions equal to 4 percent of salary. New hires would no longer be eligible for retirement health insurance benefits, but instead would get extra contributions into their 401(k) accounts. Current retirees would have to pay 20 percent of the cost for their health benefits, up from 10 percent now. Current school employees would have to contribute more toward their pensions, or else receive benefits calculated under a less generous formula. Final salaries used in that formula would be capped at $100,000, plus any extra merit pay amounts.
    Who Voted "Yes" and Who Voted "No"

  3. Received in the House on May 17, 2012.
    • Referred to the House Appropriations Committee on May 17, 2012.
      • Reported in the House on May 24, 2012, with the recommendation that the substitute (H-2) be adopted and that the bill then pass.
    • Substitute offered in the House on May 24, 2012. The substitute failed by voice vote in the House on May 24, 2012.
    • Substitute offered by Rep. Chuck Moss (R) on June 14, 2012, to adopt a substitute that does not include the Senate-passed provision that would close the school pension system to new hires and instead giving them a 401(k) account (as has been done for new state employees hired since 1997). It would also exclude some current retirees from an increase in their share of health benefit costs, and make many other detail changes. See House-passed bill for more. The substitute passed by voice vote in the House on June 14, 2012.
    • Amendment offered by Rep. Chuck Moss (R) on June 14, 2012, to revise many details of the Moss substitute, generally in ways that do not change its substance as previously described. The amendment passed by voice vote in the House on June 14, 2012.
    • Amendment offered by Rep. Anthony Forlini (R) on June 14, 2012, to move back the date of many of the proposed provisions. The amendment passed by voice vote in the House on June 14, 2012.
    • Amendment offered by Rep. Bill Rogers (R) on June 14, 2012, to require that the management of a retiree "health expenditure account" plan be put up for competitive bids. The amendment passed by voice vote in the House on June 14, 2012.
    • Amendment offered by Rep. Joan Bauer (D) on June 14, 2012, to exempt retirees whose pension checks are less than $15,000 from a proposal to increase the amount they must contribute to the health insurance the state has chosen to provide from 10 percent of its cost to 20 percent. The amendment passed by voice vote in the House on June 14, 2012.
    • Moved to reconsider in the House on June 14, 2012, the Bauer amendment. The motion passed by voice vote in the House on June 14, 2012.
    • Motion in the House on June 14, 2012, to exempt retirees whose pension checks are less than $15,000 from a proposal to increase the amount they must contribute to the health insurance the state has chosen to provide from 10 percent of its cost to 20 percent. The motion failed by voice vote in the House on June 14, 2012.
    • Amendment offered by Rep. Brandon Dillon (D) on June 14, 2012, to create exceptions to the closure of the retirement health benefits part of the system. The amendment failed by voice vote in the House on June 14, 2012.
    • Amendment offered by Rep. Richard LeBlanc (D) on June 14, 2012, to strip out a $4.7 million appropriation in the bill to pay for parts of the implentation. Among other things the presence of an appropriation appropriation in the bill has the effect of making it "referendum-proof." See House Joint Resolution W for an explanation. The amendment failed by voice vote in the House on June 14, 2012.
    • Amendment offered by Rep. Brandon Dillon (D) on June 14, 2012, to make an increase in the amount that some current retirees will have to pay for their health insurance benefit prospective only, so it would apply only to future retirees. The amendment failed by voice vote in the House on June 14, 2012.
    • Amendment offered by Rep. Sean McCann (D) on June 14, 2012, to mandate that charter school employees be enrolled in the "defined benefit" school pension system. Almost all charter schools provide employees with "defined contribution" 401(k) type benefits. The amendment failed by voice vote in the House on June 14, 2012.
    • Amendment offered by Rep. Jon Switalski (D) on June 14, 2012, to tie-bar the bill to House Bill 5640, meaning this bill cannot become law unless that one does also. HB 5640 would repeal the provision of Gov. Rick Snyder's tax reform and business tax cut that partially eliminated some of the state income tax exemptions for pension income. The amendment failed by voice vote in the House on June 14, 2012.
  4. Passed 57 to 47 in the House on June 14, 2012, to no longer provide post-retirement health benefits to new school employees, and instead give them a 401(k) contribution equal to 2 percent of their salary. Also, current retirees who are under age 65 on Jan. 1, 2013 would have to contribute 20 percent to the cost of these health benefits, up from 10 percent now. The bill would also authorize “prefunding” these retiree health benefits (which are optional and not an enforceable obligation on the state); the annual amount is not specified but is probably $100-$200 million annually. In addition, current school employees would have to contribute more toward their pensions, or else receive benefits calculated under a less generous formula. The House did not adopt a Senate-passed provision to “close” the school pension system to new hires, instead giving them a 401(k) account (as has been done for new state employees hired since 1997).
    Who Voted "Yes" and Who Voted "No"

  5. Received in the Senate on July 18, 2012.
  6. Failed 16 to 22 in the Senate on July 18, 2012, to concur with a House-passed version of the bill. The vote sends the bill to a House-Senate conference committee to work out the differences. The main poibnt of difference is that the House did not adopt the Senate-passed provision to “close” the school pension system to new hires, and instead gives them a 401(k) account (as has been done for new state employees hired since 1997). The House instead retains a slightly less generous "definded benefit" pension sysemt for new school employees.
    Who Voted "Yes" and Who Voted "No"

  7. Received in the Senate on August 15, 2012.
    • Amendment offered by Sen. Randy Richardville (R) on August 15, 2012, to revise details of various provisions in a way that does not change the bill's substance as previously described. The amendment passed by voice vote in the Senate on August 15, 2012.
  8. Passed 21 to 16 in the Senate on August 15, 2012, to no longer provide post-retirement health benefits to new school employees, and instead give them a 401(k) contribution equal to 2 percent of their salary. Also, current retirees who are over age 65 on Jan. 1, 2013 would have to contribute 20 percent to the cost of these health benefits, up from 10 percent now. The bill would also authorize “prefunding” these retiree health benefits (despite these being optional and not an enforceable obligation on the state). In addition, current school employees would have to contribute more toward their pensions, or else receive benefits calculated under a less generous formula. The orignal Senate-passed provision to “close” the school pension system to new hires was not adopted.
    Who Voted "Yes" and Who Voted "No"

  9. Received in the House on August 15, 2012.
  10. Passed 57 to 48 in the House on August 15, 2012, to no longer provide post-retirement health benefits to new school employees, and instead give them a 401(k) contribution equal to 2 percent of their salary. Also, current retirees who are over age 65 on Jan. 1, 2013 would have to contribute 20 percent to the cost of these health benefits, up from 10 percent now. The bill would also authorize “prefunding” these retiree health benefits (despite these being optional and not an enforceable obligation on the state). In addition, current school employees would have to contribute more toward their pensions, or else receive benefits calculated under a less generous formula. The orignal Senate-passed provision to “close” the school pension system to new hires was not adopted.
    Who Voted "Yes" and Who Voted "No"

  11. Signed by Gov. Rick Snyder on September 4, 2012.

Comments

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Re: 2012 Senate Bill 1040 (Revise school pension system )  by mika2000 on March 2, 2013 
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