Michigan House Bill HB6061

Michigan 2023-2024 Regular Session

• Introduced: 11/12/24
• Refer: 11/12/24
• Report Pass: 12/12/24

Caption

Retirement: defined benefit; defined benefit plan and retiree health for new hires and election option for current employees; provide for. Amends secs. 1i, 13, 64 & 68 of 1943 PA 240 (MCL 38.1i et seq.) & adds secs. 19k & 50b.

Impact

The bill's passage could result in a notable shift in the retirement strategy for state employees, effectively allowing those who feel shortchanged by the Tier 2 system to opt for a more traditional pension plan structure. Notably, the bill establishes specific time frames within which employees can make these changes, thereby introducing a strategic element to retirement planning for current state workers. This creates a framework that could potentially retain experienced employees who might otherwise consider leaving for positions with better retirement benefits.

Summary

House Bill 6061 is an amendment to the State Employees' Retirement Act and aims to offer state employees retiring under the modified system options for health insurance, as well as altering service credits. The bill introduces a structure wherein qualified participants can choose to terminate their current participation in a Tier 2 retirement system and transition to a Tier 1 plan. This change is significant as it provides enhanced options for future retirees who may favor the defined benefits associated with Tier 1 over the 401(k) structure of Tier 2.

Contention

Key points of contention have arisen concerning the sustainability of the retirement system given the shifts in funding mechanisms that this bill proposes. Critics argue that enabling a mass transition from Tier 2 to Tier 1 will put additional financial strain on the state’s retirement system, which has historically faced funding challenges. Furthermore, opposing factions highlight the inequity this might create among employees within the same department but enrolled in different tiers, which could lead to disparity in benefits based on the timing of enrollment in the retirement system.