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2011 House Bill 4701: Transition state employees to defined contribution retirement health benefit

Public Act 264 of 2011

  1. Introduced by Rep. Bill Rogers (R) on May 26, 2011, to transition state employee post-retirement health care benefits to a defined-contribution Health Savings Account type system. Among other features of the complex transition, a 3-percent employee retirement benefit payroll deduction passed in 2010 would be replaced by a revised 4 percent payroll deduction.
    • Referred to the House Appropriations Committee on May 26, 2011.
      • Reported in the House on October 27, 2011, with the recommendation that the substitute (H-6) be adopted and that the bill then pass.
    • Substitute offered in the House on November 2, 2011, to replace the previous version of the bill with one that revises many details - see House-passed version. The substitute passed by voice vote in the House on November 2, 2011.
    • Amendment offered by Rep. Sean McCann (D) on November 2, 2011, to eliminate a provision that bases the amount of the proposed lump sum contribution into the Health Retirement Account of an employee hired after 1997 on the person's age and time on the job. The amendment failed by voice vote in the House on November 2, 2011.
    • Amendment offered by Rep. Steven Lindberg (D) on November 2, 2011, to continue to include overtime pay in the basis on which employee pension levels are based if it is considered "mandatory" overtime (which would mostly affect prison workers). The amendment failed by voice vote in the House on November 2, 2011.
    • Amendment offered by Rep. Brandon Dillon (D) on November 2, 2011, to allow employees who would no longer be granted post-retirement health insurance coverage to "buy in" to the coverage at his or her own expense. The amendment failed 46 to 62 in the House on November 2, 2011.
      Who Voted "Yes" and Who Voted "No"

    • Amendment offered by Rep. Joan Bauer (D) on November 2, 2011, to strip out a modest appropriation in the bill which will have 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 November 2, 2011.
    • Amendment offered by Rep. Kate Segal (D) on November 2, 2011, to strip out a modest appropriation in the bill which will have 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 November 2, 2011.
    • Amendment offered by Rep. Vicki Barnett (D) on November 2, 2011, to exempt state employees who are considered "public transit workers or administrators" from the bill. The amendment failed by voice vote in the House on November 2, 2011.
    • Substitute offered by Rep. Fred Durhal, Jr. (D) on November 2, 2011, to replace the previous version of the bill with one that essentially strips-out most of its provisions. The substitute failed by voice vote in the House on November 2, 2011.
  2. Passed 63 to 45 in the House on November 3, 2011, to eliminate the current “defined benefit” post-retirement health insurance system for new state employees, and instead offer a “defined contribution” Health Reimbursement Account (HRA), with the state matching an employee’s deposits up to 2 percent of salary, plus an annual lump sum contribution. Employees hired since 1997 could choose to switch to this system and get a lump-sum contribution of the value of benefits they had already earned. Also, to require state employees hired before 1997 to contribute 4 percent toward their traditional “defined benefit” pensions, or else have their benefit levels “frozen” at the current level, with the state instead making contributions going forward into an employee’s 401(k) account. The bill would also exclude overtime pay from the basis on which the older employees' conventional pension benefits are calculated, and cancel a 3 percent pension contribution required from all employees under a 2010 law.
    Who Voted "Yes" and Who Voted "No"

  3. Received in the Senate on November 8, 2011.
    • Referred to the Senate Appropriations Committee on November 8, 2011.
    • Substitute offered in the Senate on December 7, 2011, to replace the previous version of the bill with one that strips-out a House passed version entitling older state employees still in the pre-1997 defined benefit pension system to include overtime pay in the basis on which their pension benefits are calculated, and which also prohibits employees who obtain a health savings retirement account under the bill to borrow against it before their retirement. The substitute passed by voice vote in the Senate on December 7, 2011.
    • Amendment offered by Sen. Vincent Gregory (D) on December 7, 2011, to require the state to pick up any potential losses in an employee's tax-deferred retirement savings account when the individual leaves the state's employ. The amendment failed 10 to 26 in the Senate on December 7, 2011.
      Who Voted "Yes" and Who Voted "No"

  4. Passed 23 to 13 in the Senate on December 7, 2011, to eliminate the current “defined benefit” post-retirement health insurance system for new state employees, and instead offer a “defined contribution” Health Reimbursement Account (HRA), with the state matching an employee’s deposits up to 2 percent of salary, plus an annual lump sum contribution. Employees hired since 1997 could choose to switch to this system and get a lump-sum contribution of the value of benefits they had already earned. Also, to require state employees hired before 1997 to contribute 4 percent toward their traditional “defined benefit” pensions (replacing a 3 percent contribution required under a 2010 law), or else have their benefit levels “frozen” at the current level, with the state instead making contributions going forward into an employee’s 401(k) account. The Senate stripped out a House-passed provision excluding overtime pay from the basis on which the older employees' conventional pension benefits are calculated (potentially enabling "pension spiking").
    Who Voted "Yes" and Who Voted "No"

  5. Received in the House on December 7, 2011.
    • Amendment offered by Rep. Bill Rogers (R) on December 8, 2011, to clarify that employees hired starting in 2012 will not be entitled to defined-benefit post-retirement health insurance benefits. The amendment passed by voice vote in the House on December 8, 2011.
    • Amendment offered by Rep. Joan Bauer (D) on December 8, 2011, to fine tune timing of a proposed refund of state employee pension contributions collected under a 2010 law. The amendment failed by voice vote in the House on December 8, 2011.
    • Amendment offered by Rep. Sean McCann (D) on December 8, 2011, to strip out a provision that would establish "graduated" vesting based on years on the job for state employee post-retirement health benefits. The amendment failed by voice vote in the House on December 8, 2011.
  6. Passed 62 to 46 in the House on December 8, 2011, to concur with the Senate-passed version of the bill, which stripped out a House-passed provision prohibiting including overtime pay in the formula by which a retiring employee's pension calculations are based. This reform is intended to prevent the practice of "pension spiking," in which an employee accumulates a lot of overtime in his or her final year or years so as to "spike" their future future pension benefits.
    Who Voted "Yes" and Who Voted "No"

  7. Received in the Senate on December 13, 2011.
  8. Passed 23 to 15 in the Senate on December 13, 2011, to concur with the House-passed version of the bill.
    Who Voted "Yes" and Who Voted "No"

  9. Signed by Gov. Rick Snyder on December 15, 2011.

Comments

Re: 2011 House Bill 4701 (Transition state employees to defined contribution retirement health benefit )  by Admin003 on December 8, 2011 

Senators Anderson, Young and Gregory, under their constitutional right of protest (Art. 4, Sec. 18), protested against the passage of House Bill No. 4701.
Senators Anderson and Gregory moved that the statements they made during the discussion of the bill be printed as their reasons for voting “no.”
The motion prevailed.
Senator Anderson’s statement, in which Senator Young concurred, is as follows:
While a few reasonable changes have been made, this bill still has a number of terrible provisions. The changes to the provisions on overtime calculation in the (S-1) substitute are improved over the House version, which would have prohibited including any overtime in one’s final compensation. Further, I support the provision that returns the 3 percent taken since November 2010 from all state employees’ paychecks. It’s the right thing to do. What isn’t right is pretty much everything else in the bill.
This bill will require those in the pension to pay 4 percent of their salary if they want to remain in the system. Proponents will say that those workers can take the 3 percent with which they’ve just been reimbursed and put that toward the new cost. However, those employees should not have had the 3 percent removed in the first place. This is especially true for the nonexclusively represented employees who didn’t receive the 3 percent raise other employees received last year. I don’t understand why government is the only field where some would want the least experienced and most poorly compensated individuals to be employed, but that’s where we are today.
Over the past decade, state employees have made numerous concessions, from an increase in their share of health care costs to furlough days to the elimination of promised wage increases. Rather than launching another attack on our state employees, this Legislature would be better served working on something that helps them in their daily work to serve the people of Michigan. I urge a “no” vote on this bill.


Senator Gregory’s statement is as follows:
I rise in opposition to this bill. I rise in opposition because I believe this bill has not been vetted enough. We need more time to spend on this. There are some questions that need to be asked and more answers to those questions that need to be made. There is one particular question I would bring up and certainly has not been answered in the body of this bill. It says that this bill is intended to spread the unfunded accrued liability for the pension system across both the defined benefit and defined contribution payrolls, rather than just across the defined benefit payroll. I would like to know how you can do that. Define contribution is just an investment. It is just employees putting their money in, and it is being matched by the state. How can you take that money and put it in a defined benefit? In my view, you can’t. To say that this is now part of the bill that you will use the money that people are investing as a means to maintain accrued liability for the defined benefit flies in the face of what we should be doing. This is a mistake. I am sure there will be questions later on how we can do that. That is an example of moving too fast on a bill and doing things without going through all the fine lines.
Also I personally believe that there are other ways to achieve the goals that the state wants to achieve other than saying that we are going to eliminate the defined benefit and charge a 4 percent interest. We could have a hybrid system. There are several different ways to accomplish what we wanted without going this way, but with very little debate, I believe that is what has hurt the state in the past and will continue hurting the state if all parties are not heard and all ideas are not expressed. I would ask for a “no” vote.


 


Senator Gregory asked and was granted unanimous consent to make a statement and moved that the statement be printed in the Journal.
The motion prevailed.
Senator Gregory’s statement is as follows:
I am presenting this amendment to the bill before us that would make a person’s retiree health care dependent on the stock market. We all know that this is now something where you would be investing in. As anyone who has observed the market’s stomach-turning volatility since 2008 knows, some people who retired during that period saw half of their nest eggs wiped out. Similarly, people on fixed incomes have not had their health care at risk when a recession hits, and they are already struggling. There are no second chances in retirement, and seniors should not be worrying about whether they should have to choose between health care or paying their heating bills.
The amendment that I am offering would say that the money the employee invests in this system will be guaranteed by the state. If the stock market crashes or goes 90 percent belly up, they have put in $50,000 of their own money and the state will then make sure they receive their $50,000 back. I believe that is the least that we can do to guarantee our employees some sort of semblance of payments for health care that they won’t have otherwise. While this amount may not go very far, I feel it is the right and fair thing to do. I ask my colleagues for their support.



Re: 2011 House Bill 4701 (Transition state employees to defined contribution retirement health benefit )  by Brian Wood on June 8, 2011 

This better include these useless "retired" legislators.



Re: 2011 House Bill 4701 (Transition state employees to defined contribution retirement health benefit )  by changeagent on June 7, 2011 

Would this effect current retirees or only change the system for future retirees?



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