Legislative Analysis
Phone: (517) 373-8080
MPSERS – REVISE UAAL CONTRIBUTION
http://www.house.mi.gov/hfa
AND PAYROLL GROWTH ASSUMPTION
Analysis available at
House Bill 5002 (H-1) http://www.legislature.mi.gov
Sponsor: Rep. Julie Rogers
Committee: Appropriations
Complete to 9-20-23
SUMMARY:
House Bill 5002 is a budget implementation bill associated with 2023 PA 103 that would
amend the Public School Employees Retirement Act to do both of the following:
• Revise the unfunded actuarial accrued liability (UAAL) contribution for a university
reporting unit based on the deposit of an additional $200.0 million in FY 2022-23 to
reduce the UAAL for the seven universities participating in the Michigan Public School
Employees’ Retirement System (MPSERS).
• Revise the payroll growth assumption rate for a non-university reporting unit to reflect
the accelerated reduction funded in 2023 PA 103.
UAAL Contribution
The bill would revise the UAAL contribution for the seven universities participating in the
MPSERS for FY 2023-24 to recognize the $200.0 million appropriation made in 2023 PA 103
in addition to the prior appropriation of $300.0 million that is required to be recognized under
current law. Specifically, the bill would require the UAAL contribution for FYs 2022-23 and
2023-24 to equal the actuarial determined contribution rather than the FY 2021-22 amount
(prior contribution floor). The bill would also have the effect of resetting the contribution floor
to the FY 2023-24 calculated UAAL contribution for the subsequent fiscal year.
The actuarial determined contribution for FY 2023-24 would recognize the $200.0 million
deposit made into the MPSERS in a FY 2022-23 supplemental in 2023 PA 103 to lower UAAL
contributions for the universities. $300.0 million was previously deposited into the MPSERS
system through 2022 PA 144, a FY 2021-22 supplemental.
Payroll Growth Assumption
The bill would require that the pension and retiree health care payroll growth assumption rate
for a reporting unit that is not a university reporting unit be 0.75% for FY 2023-24, a 50-basis-
point acceleration in the payroll growth assumption rate reduction required under current law.
For subsequent fiscal years, beginning in FY 2024-25, the bill would retain the current
requirement that the payroll growth assumption be reduced annually by 50 basis points until
the rate is zero and level dollar amortization payments for UAAL are achieved.
For FY 2022-23, the payroll growth assumption was 1.75%, which represented a 75-basis-
point acceleration due to an appropriation under 2022 PA 144. Under current law, the payroll
growth assumption will be lowered by 50 basis points each year until the assumption is 0%,
presumably in FY 2026-27. However, beginning in FY 2024-25, the Office of Retirement
Services (ORS) has the authority to reduce the rate of return by 25 basis points instead in any
year in which the direct cost of a 50-basis-point reduction would increase the combined pension
House Fiscal Agency Page 1 of 3
 and retiree health care UAAL contribution by 7% or more compared to the previous year. This
authority would remain under the bill.
The bill would effectuate level dollar amortization for MPSERS one year sooner than current
law under current estimates.
MCL 38.1341
FISCAL IMPACT:
UAAL Contribution
The bill is expected to lower annual MPSERS UAAL contributions by an estimated $18.9
million for the seven universities that participate in the system. This represents additional
savings over and above those realized by the universities due to the $300.0 million deposit in
2022 PA 144. A breakdown of anticipated cost savings for the universities is found in Table 1.
Table 1 – Estimated FY 2023-24 UAAL Contribution Savings
Estimated
FY 2023-24
University UAAL Savings
Central Michigan University $4,704,599
Eastern Michigan University 2,348,271
Ferris State University 3,093,316
Lake Superior State University 580,542
Michigan Technological University 2,137,943
Northern Michigan University 1,775,282
Western Michigan University 4,321,796
TOTAL $18,961,749
The estimated FY 2023-24 UAAL savings are a snapshot in time and reflect the $200.0 million
UAAL payment in 2023 PA 103 and the most recent actuarial valuation made by ORS.
University savings could be higher or lower depending on actual FY 2023-24 payroll.
Contribution savings due to the UAAL deposits will continue in subsequent fiscal years, but
would change from the amounts specified in the table based on future actuarial valuations.
Payroll Growth Assumption
The 50-basis-point acceleration in the payroll growth assumption to 0.75% under the bill would
increase baseline costs by an estimated $90.8 million in FY 2023-24, which is funded as part
of the $215.8 million MPSERS Retirement Obligation Reform Reserve Fund appropriated
under section 147c of the School Aid Act for FY 2023-24 (2023 PA 103). The remaining
$125.0 million appropriated from the reserve fund accommodated the required 50-basis-point
reduction to 1.25% under current law. The state would realize an increase in baseline costs
annually through FY 2025-26 because the annual payroll growth assumption rate would be
lower than under current law (see Table 2). 2023 PA 103 deposits $400.0 million into the
MPSERS Retirement Obligation Reform Reserve Fund, which could be used to help offset
costs in future fiscal years.
House Fiscal Agency HB 5002 (H-1) Page 2 of 3
 Table 2 – Payroll Growth Assumption Rates
Fiscal Year Current Law HB 5002
2020-21 3.5% 3.5%
2021-22 3.0% 3.0%
2022-23 1.75% 1.75%
2023-24 1.25% 0.75%
2024-25 0.75% 0.25%
2025-26 0.25% 0.0%
2026-27 0.0% 0.0%
2027-28 0.0% 0.0%
As noted above, the bill would shift MPSERS to a level dollar amortization method one year
sooner than current law. A level dollar amortization method generally front-loads payments
compared to a level percent of payroll method, creating an initial increase in costs compared
to what would have otherwise been anticipated. Those short-term cost increases are offset by
long-term savings because contributing those funds into the system earlier also allows them to
gain investment returns over a longer period.
In sum, the bill would increase costs in the near term (noted above) and generate longer-term
savings of an indeterminate amount.
Fiscal Analysts: Ben Gielczyk
Perry Zielak
Jacqueline Mullen
Noel Benson
■ This analysis was prepared by nonpartisan House Fiscal Agency staff for use by House members in their
deliberations and does not constitute an official statement of legislative intent.
House Fiscal Agency HB 5002 (H-1) Page 3 of 3


Statutes affected:
Substitute (H-1): 38.1341
House Introduced Bill: 38.1341
As Passed by the House: 38.1341