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2014 House Bill 5568: Detroit bankruptcy settlement and grant package - pension limits

Public Act 183 of 2014

  1. Introduced by Rep. Gail Haines (R) on May 8, 2014, to no longer offer "defined benefit" pension and post-retirement health insurance benefits to new Detroit city employees hired starting in 2015 (subject to existing union contracts), and instead provide 401(k)-type contributions limited to 4 percent of the employee’s base pay, and retirement health savings account contributions limited to 2 percent. Subject to current union contracts, the bill would also ban supplemental “13th check” payments to current retirees based on pension fund investment performance, and ban pension “spiking” schemes that use include overtime, accrued sick or vacation pay, bonuses, fringe benefits and lump sum payments in the formula used to calculate pensions (abuses which contributed to Detroit’s bankruptcy). This is part of a legislative package consisting of House Bills 5566 to 5575 that are related to the Detroit bankruptcy and a proposed state grant to the city of $195 million.
    • Referred to the House Detroit's Recovery and Michigan's Future Committee on May 8, 2014.
      • Reported in the House on May 21, 2014, with the recommendation that the substitute (H-2) be adopted and that the bill then pass.
    • Substitute offered in the House on May 22, 2014. The substitute passed by voice vote in the House on May 22, 2014.
    • Amendment offered by Rep. Tom McMillin (R) on May 22, 2014, to prohibit the city from offering new employees "defined benefit" pension benefits in which taxpayers assume the burden of any unfunded liabilities. The city could only offer new employees some form of defined contribution benefits. The amendment failed by voice vote in the House on May 22, 2014.
  2. Passed 85 to 25 in the House on May 22, 2014, to limit the normal contributions Detroit can make to city employees retirement benefits, but still allow the city to enroll new employees in a "defined benefit" pension system that creates future underfunding risks for taxpayers. The normal contribution caps would be 7 percent for pensions and 2 percent (or the amount the state gives its employees) for a retirement health savings account. The bill also restricts "pension spiking" and "13th check" extra-benefit schemes. It was introduced as a condition for the state giving Detroit $195 million toward its bankruptcy settlement, and originally would have prohibited the city from creating new unfunded liability risks each new hire (giving them defined contribution benefits instead), but that restriction was removed in committee. The remaining provisions take effect after a court-approved post-bankruptcy "workout" period ends in 2023.
    Who Voted "Yes" and Who Voted "No"

  3. Received in the Senate on May 27, 2014.
    • Referred to the Senate Government Operations Committee on May 27, 2014.
      • Reported in the Senate on June 3, 2014, with the recommendation that the bill pass.
  4. Passed 24 to 14 in the Senate on June 3, 2014, to limit the normal contributions Detroit can make to city employees retirement benefits, but still allow the city to enroll new employees in a "defined benefit" pension system that creates future underfunding risks for taxpayers. The normal contribution caps would be 7 percent for pensions and 2 percent (or the amount the state gives its employees) for a retirement health savings account. The bill also restricts "pension spiking" and "13th check" extra-benefit schemes. It was introduced as a condition for the state giving Detroit $195 million toward its bankruptcy settlement, and originally would have prohibited the city from creating new unfunded liability risks each new hire (giving them defined contribution benefits instead), but that restriction was removed in committee. The remaining provisions take effect after a court-approved post-bankruptcy "workout" period ends in 2023.
    Who Voted "Yes" and Who Voted "No"

  5. Signed by Gov. Rick Snyder on June 19, 2014.

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