Legislative Analysis
Phone: (517) 373-8080
MPSERS ANNUAL CONTRIBUTION REQUIREMENTS
http://www.house.mi.gov/hfa
House Bill 5803 (proposed substitute H-2)
Analysis available at
Sponsor: Rep. Matt Koleszar http://www.legislature.mi.gov
Committee: Appropriations [Discharged]
Complete to 6-20-24
SUMMARY:
House Bill 5803 would amend the Public School Employees Retirement Act to do all of the
following regarding the Michigan Public School Employees Retirement System (MPSERS):
• Provide that, beginning with FY 2024-25, a reporting unit must contribute the normal
costs for retiree health benefits under the act and the unfunded actuarial accrued
liability (UAAL) amount only if the actuarial valuation prepared under the act
demonstrates that, as of the beginning of a fiscal year and after all credits and transfers
required for the previous fiscal year have been made, the sum of the actuarial value of
assets and the actuarial present value of future normal cost contributions is less than
the actuarial present value of retiree health benefits. Otherwise, the reporting unit
would have to contribute only the normal costs for retiree health benefits under the act.
• Provide, for FY 2024-25, that the UAAL contribution must equal the actuarially
determined contribution (rather than having to equal or exceed the UAAL contribution
amount for FY 2023-24).
• Provide that, except for the seven universities participating in MPSERS, the UAAL
contribution rate applied to payroll must not exceed 14.56% in FY 2024-25 and must
not exceed 13.96% in FY 2025-26 and subsequent fiscal years. The current rate cap,
which would continue to apply to the university reporting units, is 20.96%.
• Eliminate, beginning with the 2024-25 fiscal year, the 3% contribution toward
retirement health care benefits now required of MPSERS employees hired before
September 4, 2012.
MCL 38.1341 and 38.1343e
FISCAL IMPACT:
The bill would provide a net cost for the state School Aid Fund, reduce eligible reporting unit
costs, and reduce costs for retirement system members currently contributing 3% of salary for
normal costs associated with other post-employment benefits (OPEB).
Currently, the Public School Employees Retirement Act includes a floor provision requiring
annual contributions toward the pension and OPEB unfunded actuarial accrued liability
(UAAL) to be no less than the prior year until the UAAL reaches 100% funded status. Based
on the 2022 valuation (used for the FY 2024-25 budget), the OPEB UAAL was 99.2% funded,
which would remain the floor provision for FY 2024-25. The bill would remove the floor
provision for FY 2024-25 (one year earlier than projected), which would reduce state costs by
approximately $669.4 million in FY 2024-25. Under current projections, the system would
have triggered removal of the floor provision for FY 2025-26; therefore, the bill doesn't affect
savings (approximately $680.0 million) in future fiscal years because the savings were already
anticipated.
House Fiscal Agency Page 1 of 2
 The reduction in the non-university reporting unit UAAL contribution rate on payroll will
reduce reporting unit costs by approximately $666.3 million in FY 2024-25 and $748.8 million
in FY 2025-26. Due to rising payroll, the reporting unit savings increase annually, reaching an
estimated $834.6 million by FY 2029-30. The net impact on the School Aid Fund from the
removal of OPEB funding floor and the reduction in the reporting unit UAAL contribution rate
on payroll is reflected in Table 1.
The bill would also remove the 3% contribution that OPEB-eligible teachers are paying for
normal costs and shift those costs to the reporting unit. The 3% is expected to equal
approximately $181.5 million in FY 2024-25 and is anticipated to decline by about $10.0
million per year as that closed class of teachers continues to retire. The net impact on reporting
units from the savings generated from the reduction in the 20.96% UAAL contribution cap to
13.9% and the costs incurred by shifting the employee 3% to reporting units is reflected in
Table 2.
Table 1: Impact to School Aid Fund (HB 5803 (H-2))
Fiscal Year OPEB Savings* UAAL Cap Reduction Cost Net Savings/Cost
FY 2025 $670.0 -$666.3 $3.7
FY 2026 680.0 -748.8 -68.8
FY 2027 680.0 -769.4 -89.4
FY 2028 680.0 -790.6 -110.6
FY 2029 680.0 -812.3 -132.3
FY 2030 680.0 -834.6 -154.6
* OPEB savings is $680m ongoing but will also cost $10m one-time in FY 25 for a net of $670m
Table 2: Impact to Reporting Units* (HB 5803 (H-2))
Fiscal Year UAAL Cap Savings 3% Normal Cost Shift Net Savings
FY 2025** $666.3 -$181.5 $484.8
FY 2026*** 748.8 -171.8 577.0
FY 2027 769.4 -161.9 607.5
FY 2028 790.6 -151.8 638.7
FY 2029 812.3 -141.9 670.4
FY 2030 834.6 -132.0 702.6
* Reporting units for UAAL include: traditional local school districts, public school academies (PSAs),
intermediate school districts (ISDs), district libraries, and community colleges. Reporting units for 3%
include the units for UAAL plus universities.
**Represents 14.56% cap
***Cap lowered to 13.96% in FY 2026 and for all future years.
Legislative Analyst: Rick Yuille
Fiscal Analyst: Ben Gielczyk
■ 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 5803 (proposed H-2 substitute) Page 2 of 2


Statutes affected:
Substitute (H-2): 38.1341, 38.1343
House Introduced Bill: 38.1341, 38.1343
As Passed by the House: 38.1341, 38.1343