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Mackinac Center for Public Policy
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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.

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