Local Meeting on Pension Law Changes

August 30, 2012

Informational Session on Senate Bill 1040

MEA Financial Services Senate Bill 1040 Meetings will provide information about:

  • How Senate Bill 1040 will affect you
  • How to navigate Senate Bill 1040
  • Your pension options
  • The Michigan Public School Employees Retirement System

Please Join us for an Informational Session with one of the Regional Managers from MEA Financial Services

Date: September 18, 2012
Time: 5:30 p.m. – 7:00 p.m.
Location: MEA Office – Kalamazoo
5600 Portage Rd., Kalamazoo 49002
To register: Call 269/344-7428

Presenter:

Bruce Reaume– Northern and Southern Zones President & Registered Principal, Paradigm Equities, Inc.
Western Regional Manager, MEA Financial Services

 

This is what the Office of Retirement Services is telling folks regarding SB1040:

The Michigan legislature has given final approval to SB 1040 which reforms the Michigan Public School Employees’ Retirement System. The next step is for Governor Snyder to sign the bill, which is expected to happen on Tuesday, September 4.

miAccount is currently under construction. miAccount will have limited functionality until Governor Snyder signs SB 1040 into law. We’re creating your personalized estimates, information and tools including FAQs and calculators, and the step-by-step process you’ll use to make your elections. Once the bill is signed, make sure to log in right away and get the information you need to make your elections.

Despite the current limited miAccount functionality, you can still access the Legislative Summary of SB 1040 and a link to the Michigan Legislature website with full bill information in miAccount.

If you’re not registered in miAccount, take a few minutes to register today.

Summary of Senate Bill 1040 (2012)

Michigan Public School Employees Retirement System Reform

image image Department of Technology. Management & Budget

This summary highlights changes to the Public School Employees Retirement Act (P.A. 300 of 1980, as amended) outlined in Senate Bill 1040 of 2012, and passed by the Michigan legislature on August 15,2012. The next step is for Governor Snyder to consider the bill for signature.

Summary and Election Window

The legislation grants all active members of the Michigan Public School Employees Retirement System, who earned service credit in the 12 months ending September 3,2012, or were on an approved professional services or military leave of absence on September 3,2012, a voluntary election regarding their retirement healthcare. Active members who first became a member before July 1,2010, are also granted a voluntary election regarding their pension.

Any changes to a member’s healthcare benefit and, if applicable, pension, would be effective as of the member’s transition date, which is defined as the first day of the pay period that begins on or after December 1,2012.

DEADLINE: All elections must be made in miAccount beginning Tuesday, September 4,2012, and no later than 5:00 p.m. EDT, Friday, October 26,2012. Changes to any election must be made in miAccount before the election deadline.

The legislation also establishes benefits for employees who first work on or after September 4, 2012, directs changes to the rates that public schools contribute to the retirement system, and orders several plan- and benefit-related studies.

Retirement Healthcare Election

Members can choose to continue contributing 3 percent of their compensation to the Retiree Healthcare Fund and keep the premium subsidy benefit, or they can choose not to pay the 3 percent contribution and instead choose the Personal Healthcare Fund, which can be used to pay healthcare expenses in retirement.

  • Premium Subsidy: Members who voluntarily elect this option will continue to contribute 3 percent of their compensation to the Retiree Healthcare Fund and will retain eligibility for the retiree health insurance premium subsidy offered by the state upon their retirement. The subsidy for members who first worked before July 1,2008, is the maximum subsidy allowed by statute. The subsidy for members who first worked on or after July 1,2008, is a graded premium subsidy based on career length where members accrue credit towards their insurance premiums in retirement, not to exceed the maximum subsidy allowed by statute. The legislation sets the maximum subsidy at 80 percent beginning January 1,2013 (90 percent for those Medicare eligible and enrolled in the insurances on that date).
  • Personal Healthcare Fund: Members who voluntarily elect this option will establish a portable, tax-deferred fund that can be used for paying healthcare expenses in retirement. They will opt-out of the premium subsidy benefit, effective as of their transition date, and they will be automatically enrolled in a 2 percent employee contribution into their 457 account as of their transition date, earning them a 2 percent employer match into a 401 (k) account. Members who select this option will stop paying the 3 percent Retiree Healthcare Fund contribution as of their transition date, and their prior contributions will be deposited into their 401 (k) account on or before February 1, 2013.

Members who do not make an election before the deadline will continue to make the 3 percent Retiree Healthcare Fund contribution and will retain their premium subsidy benefit.

Former members who made contributions to the Retiree Health Care Fund but do not qualify for a retiree healthcare subsidy can request a refund of their contributions from ORS upon reaching age 60 or older. The refund will be paid in equal monthly installments over a 60 month (5-year) period as a supplemental retirement allowance.

Deferred or nonvested members on September 3, 2012 who are rehired on or after September 4,2012, will contribute 3 percent to the Retiree Health Care Fund and will retain the premium subsidy benefit. Returning members who made the retirement healthcare election will retain whichever option they chose.

Michigan Public School Employees Retirement System – Reform

Members who first worked before July 1, 2010, and who earned service credit in the 12 months ending September 3, 2012, or were on an approved professional services or military leave of absence on September 3, 2012, can voluntarily choose to increase, maintain, or stop their contributions to the pension fund. They are provided with the following options:

• Option 1: Members selecting Option 1 voluntarily elect to increase their contributions to the pension fund as noted
below, and retain the 1.5 percent pension factor in their pension formula. The increased contribution would begin
as of their transition date and continue until they terminate public school employment.

  • Basic Plan members: 4 percent contribution (currently 0 percent)
  • MIP-Fixed, MIP-Graded, and MIP-Plus members: a flat 7 percent contribution (currently 3.9 percent for MIP-Fixed, up to 4.3 percent for MIP-Graded, or up to 6.4 percent for MIP-Plus).
    • Option 2: Members selecting Option 2 voluntarily elect to increase their contribution to the pension fund as stated in Option 1 and retain the 1.5 percent pension factor in their pension formula. The increased contribution would begin as of their transition date and continue until they reach 30 years of service. If and when they reach 30 years of service, their contribution rates will return to the previous level in place before their transition date (0 percent for Basic Plan members, 3.9 percent for MIP-Fixed, up to 4.3 percent for MIP-Graded, or up to 6.4 percent for MIP-Plus). The pension formula for any service thereafter would include a 1.25 percent pension factor.
    • Option 3: Members selecting Option 3 voluntarily elect not to increase their contribution to the pension fund and maintain their current level of contribution to the pension fund. The pension formula for their years of service before their transition date will include a 1.5 percent pension factor. The pension formula for any service thereafter will include a 1.25 percent pension factor.
    • Option 4: Members selecting Option 4 voluntarily elect to no longer contribute to the pension fund. Their pension will be calculated based on their years of service and final average compensation as of their transition date, and a 1.5 percent pension factor. They will be switched to a Defined Contribution (DC) plan on their transition date, where they will receive a 4 percent employer contribution to a tax-deferred 401 (k) account and can choose to contribute up to the maximum amounts permitted by the IRS to their 457 account.

    Members who do not make an election before the deadline will maintain their current level of contribution to the pension fund. The pension formula for their years of service up to their transition date will include a 1.5 percent pension factor. The pension formula for any service thereafter will include a 1.25 percent pension factor.

    Deferred or nonvested public school employees on September 3, 2012, who return to public school employment on or after September 4, 2012, will maintain their previous level of contribution to the pension fund. The pension formula for their years of service up to their transition date, will include a 1.5 percent pension factor. The pension formula for any service thereafter would include a 1.25 percent pension factor. Returning members who made the retirement plan election will retain whichever option they chose.

    Benefits for New Hires  The state will no longer offer an insurance premium subsidy in retirement for public school employees who first work on or after September 4, 2012. All new employees will be placed into the Personal Healthcare Fund where they will have support saving for retirement healthcare costs in the following ways:

    • They will be automatically enrolled in a 2 percent employee contribution into a 457 account as of their date of hire, earning them a 2 percent employer match into a 401 (k) account.
    • They will receive a credit into a Health Reimbursement Account (HRA) at termination if they have at least 10 years of service at termination. The credit will be $2,000 for participants who are at least 60 years of age at termination or $1,000 for participants who are less than 60 years of age at termination.

    Employees hired on or after September 4, 2012, will be able to choose between two retirement plans: the existing
    Pension Plus plan, which is a hybrid plan that contains a pension component and a tax-deferred investment account
    that earns a 50 percent employer match on employee contributions of up to 1 percent of salary, or a Defined
    Contribution (DC) plan that provides a 50 percent employer match on employee contributions of up to 6 percent of
    salary. New employees will have 75 days from the date of their first pay period to make their election; if no election is
    made they will be placed in the Pension Plus plan. If they elect the DC plan, they will be automatically enrolled in a 6
    percent employee contribution to a tax-deferred, 457 plan retroactive to their date of hire, earning them a 3 percent
    employer match into a 401 (k) plan. 

    R1006C (August, 2012)

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    CONTRACT SETTLED — VOTE TUESDAY!

    August 26, 2012

    A tentative agreement has been reached for the upcoming school year. In order for salary and step changes to be programmed for the Friday, August 31 payroll, we must vote (and ratify, of course) on Tuesday immediately following the “welcome back” breakfast. Please read over the settlement information, for there is a major change to the salary structure and steps, as well as changes to contract language regarding class size and tuition reimbursement.

    Tentative Agreement Details

    Messa ABCs 2012-2013


    Summer Update #2

    August 19, 2012

    1. The bargaining team has met three more times since the last update. We’ve agreed to the 2012-2013 calendar (see the district website). We’ve talked about contract language and financial matters, but have not yet reached agreement. The team bargains again Thursday, August 23rd.

    2. PEA Board members will meet with new PEA members (8 so far) on Monday, Aug. 27 for association information and lunch. We have had many changes in staff since last year.

    3. The general membership meeting is scheduled for Tuesday, August 28th at 3:30 in the middle school. This is our first (long) day back (starting with a 7:30 a.m. breakfast) — but please attend this meeting. Important information for the year will be presented, including insurance options coming up and other changes. If you cannot attend, please contact your building representative for an update.