Legislative Analysis
Phone: (517) 373-8080
ALLOW PUBLIC SCHOOL EMPLOYEES AND STATE
http://www.house.mi.gov/hfa
EMPLOYEES TO JOIN PENSION PLAN
Analysis available at
House Bill 6060 as reported from committee http://www.legislature.mi.gov
Sponsor: Rep. Matt Koleszar
House Bill 6061 as reported from committee
Sponsor: Rep. Regina Weiss
Committee: Labor
Complete to 12-13-24
SUMMARY:
Together, House Bills 6060 and 6061 would amend the Public School Employees Retirement
Act and the State Employees’ Retirement Act to allow public school employees and certain
state employees, respectively, to join a defined benefit pension plan.
House Bill 6060 would amend the Public School Employees Retirement Act to allow newly
hired employees and current employees to opt in to the act’s “Tier 1” defined benefit (DB)
retirement plan.
The Public School Employees Retirement Act establishes and governs the Michigan Public
School Employees Retirement System (MPSERS), the retirement system for Michigan’s public
school teachers and other public school employees. MPSERS consists of two options, Tier 1
and Tier 2, with hybrid plans available.
Generally speaking, Tier 1 is a defined benefit plan, and Tier 2 is a defined contribution (DC)
plan. An employee’s hire date determines which retirement plans they are eligible for (see
Background, below). New hires default to being members in the Pension Plus 2 plan, meaning
they are both Tier 1 members and Tier 2 qualified participants, if they do not choose otherwise
within the 75 days following their employment. Traditional Tier 1 pension plans without a DC
component have been closed to new employees since July 1, 2010.
New hires
Under House Bill 6060, MSPERS would have to allow each individual who first becomes a
Tier 2 qualified participant and is hired after September 30, 2025, to elect to become a qualified
participant in Tier 2, a member of Tier 1, or both a qualified participant in Tier 2 and a member
of Tier 1. 1 MPSERS would have to determine a method of accepting elections between the
date the individual begins employment and the 75th day after the individual’s first payroll date.
MPSERS would have to provide a form on which eligible individuals could make an election,
which would have to be accompanied by a description of the benefit options and include an
acknowledgment that the individual has received the description of the benefit options.
1
An individual who elects to be a qualified participant in Tier 2 and not a member of Tier 1 would not be included
under the Public School Employees Retirement Act’s definition of member.
House Fiscal Agency Page 1 of 7
 Pension opt-in for current employees
Between January 1, 2025, and April 1, 2025, each individual who is a qualified participant as
of December 31, 2024, could make a written election to terminate their status as a qualified
participant in Tier 2 and become a member in the Tier 1 defined benefit plan. An individual
who does not elect to join Tier 1 would continue to be a qualified participant in the Tier 2 DC
plan.
An election would be irrevocable, and an individual who files the written election would
become a member of Tier 1 on April 1, 2025. The Michigan Department of Technology,
Management, and Budget (DTMB) would have to determine the method by which an
individual would make a written election, in consultation with MPSERS’ actuary and the
MPSERS Retirement Board.
If the individual is married at the time of the election, the election generally would not be
effective unless signed by the individual’s spouse. (The MPSERS Retirement Board could
waive this requirement if the spouse’s signature cannot be obtained due to extenuating
circumstances.)
Elections would be subject to the Eligible Domestic Relations Order Act.
A member who elects to become a member of Tier 1 could purchase up to five years of service
credit in a manner determined by the retirement system.
The service credit for a qualified participant who elects to become a member of Tier 1 could
not be used to satisfy the minimum number of years of credit required to receive a retirement
allowance under the act or to calculate the individual’s retirement allowance.
If DTMB receives notification from the Internal Revenue Service that any of these provisions
will cause MPSERS to be disqualified for tax purposes under the Internal Revenue Code, then
those provisions would not apply.
Final average compensation
Retirement benefits for DB plan members are based on the member’s final average
compensation (FAC) and years of service. Under the Public School Employees Retirement
Act, FAC is calculated based on the member’s total compensation earned within the averaging
period in which the aggregate amount of compensation was highest, divided by the service
credit accrued during that period. Currently, the averaging period is 36 consecutive calendar
months for a DB plan member hired before July 1, 2010, and 60 consecutive calendar months
for a MPSERS member hired on or after July 1, 2010. 2
Under House Bill 6060, the averaging period for an individual who first became a member on
or after October 1, 2025, would be 36 calendar months.
2
If the member has less than one year of credited service in the averaging period, the number of consecutive calendar
months in the averaging period must be increased to the lowest number of consecutive calendar months that contains
one year of service. The bill would not amend this provision.
House Fiscal Agency HBs 6060 and 6061 as reported Page 2 of 7
 Health care match
Generally speaking, the act requires employers to match employee Tier 2 contributions, up to
2%, for health care costs for individuals hired on or after September 4, 2012, or current
employees who elected to opt into the 2% match. MPSERS must also calculate an amount to
be credited to a Tier 2 account for a member who opts in that is equal to their 3% contributions
toward retirement health care. 3 Employees additionally receive a lump sum deposited into a
Health Reimbursement Account upon termination of employment equal to $1,000 for an
employee who terminates employment prior to reaching age 60 with ten years of service or
$2,000 for an employee who terminates employment after reaching age 60 with ten years of
service.
Under House Bill 6060, these provisions would no longer apply after the bill takes effect.
Normal cost contributions
Finally, a member of the Pension Plus 2 plan would no longer be required to contribute their
50% share of normal cost contributions to the member investment plan.
MCL 38.1304 et al. (amended); MCL 138.1369h et al. (proposed)
House Bill 6061 would amend the State Employees’ Retirement Act to automatically enroll
newly hired employees in the act’s “Tier 1” defined benefit (DB) retirement plan and to allow
current employees to opt in to the DB plan.
The State Employees’ Retirement Act establishes and governs the State Employees’
Retirement System (SERS), the retirement system for employees of the Michigan Civil Service
Commission, appointed executive officials, and employees of the legislature and judiciary.
SERS is administered by the Office of Retirement Services and consists of two plans: a defined
benefit pension plan (Tier 1) and a 401(k)-style defined contribution plan (Tier 2), with hybrid
options available for certain employees (see Background, below). Members in the defined
benefit (DB) plan become eligible to receive a monthly pension benefit when they meet certain
age and service requirements, at an amount based on their final average compensation (FAC)
and years of service. The DB plan closed to all new hires on March 31, 1997, and all new
public employees are now automatically enrolled in the Tier 2 defined contribution SERS plan.
Tier 1 currently means the retirement plan available to an individual hired before
March 31, 1997, who does not elect to become a qualified participant of Tier 2.
Under House Bill 6061, the term would additionally include both of the following:
• The retirement plan available to an individual who was first hired between
March 30, 1997, and the bill’s effective date who elects to become a member
of Tier 1 in accordance with the provisions of HB 6061.
• An individual who was first employed and entered on the payroll on or after
the date the bill takes effect. 4
3
2024 PA 127 eliminated the 3% contribution toward retirement health care benefits now required of MPSERS
employees, beginning in FY 2025-26: https://www.legislature.mi.gov/documents/2023-
2024/billanalysis/House/pdf/2023-HLA-5803-5821B240.pdf.
4
This provision presumably refers to a retirement plan available to these individuals.
House Fiscal Agency HBs 6060 and 6061 as reported Page 3 of 7
 Tier 2 means the retirement plan established under section 401(k) of the Internal
Revenue Code that is available to qualified participants.
Pension opt-in for current employees
Between January 1, 2025, and March 1, 2025, each individual who is a Tier 2 qualified
participant as of December 31, 2024, could make a written election to terminate their status as
a qualified participant in Tier 2 and become a member in the Tier 1 defined benefit plan. An
individual who does not elect to join Tier 1 would continue to be a qualified participant in the
Tier 2 defined contribution plan. 5
An election would be irrevocable, and an individual who files the written election would
become a member of Tier 1 on June 1, 2025. The Michigan Department of Technology,
Management, and Budget (DTMB) would have to determine the method by which an
individual would make a written election, in consultation with SERS’ actuary and the State of
Michigan Retirement Board.
If the individual is married at the time of the election, the election generally would not be
effective unless signed by the individual’s spouse. (The retirement board could waive this
requirement if the spouse’s signature cannot be obtained due to extenuating circumstances.)
Elections would be subject to the Eligible Domestic Relations Order Act.
A member who elects to become a member of Tier 1 could purchase up to five years of service
credit in a manner determined by SERS.
The service credit for a qualified participant who elects to become a member of Tier 1 could
not be used to satisfy the minimum number of years of credit required to receive a retirement
allowance under the act, to calculate the individual’s retirement allowance, or to satisfy the
minimum number of years of service credit required to receive retiree health benefits, as
described below.
If DTMB receives notification from the Internal Revenue Service that any of these provisions
will cause SERS to be disqualified for tax purposes under the Internal Revenue Code, then
those provisions would not apply.
Retiree health care
Under current law, employees in the DC 401(k) plan who were hired between March 31, 1997,
and January 1, 2012, vest into a graded premium health insurance benefit after completing ten
years of service. Unless they elect to switch to an employer match of up to 2% of their
compensation into a 401(k) or 457 plan, those employees earn an employer contribution of 3%
of the insurance premium for the health care insurance provided by SERS for each year of
service completed, up to a maximum of 90% after 30 years. Employees become eligible to
elect health insurance coverage after they reach age 55 if they have 30 years of service or after
they reach age 60 if they have ten years of service.
5
The bill would specify that any employees hired between March 30, 1997, and the bill’s effective date who did not
elect to terminate participation in Tier 2 to join the DB plan are not eligible for membership in the Tier 1 plan.
House Fiscal Agency HBs 6060 and 6061 as reported Page 4 of 7
 These provisions do not apply to employees who were hired on or after January 1, 2012, 6 or
employees hired before that date who choose an employer 401(k) or 457 match rather than
retaining their health care insurance benefit. House Bill 6061 would eliminate these
exemptions.
Employees receiving matching contributions in lieu of retiree health care have the option of
purchasing a retiree health plan from the state’s health plan if they immediately enroll upon
retirement or separation from the state. HB 6061 would remove a provision that also grants
this option to all employees hired after January 1, 2012.
MCL 38.1i et al. (amended); MCL 38.19k and 38.50b (proposed)
BACKGROUND:
Michigan Public School Employees Retirement System
2012 PA 300 required all employees in the Michigan Public School Employees Retirement
System (MPSERS) who were hired prior to July 1, 2010, (when new employees began entering
a new hybrid retirement plan) to make an election between three options:
• Increase their own retirement contributions to 4% for the Basic Plan and 7% for the
Member Investment Plan (MIP) and maintain a 1.5% pension multiplier.
• Maintain current contribution rates but freeze existing benefits at a 1.5% multiplier and
receive a 1.25% pension multiplier for future years of service.
• Freeze existing pension benefits and move into a defined contribution (DC), 401(k)-
style plan with a flat 4% employer contribution for future service.
MPSERS has several different benefit plans depending on the hire date of employees:
• The Basic and Member Investment plans are traditional pension plans for employees
hired before July 1, 2010.
• The hybrid Pension Plus Plan with both a pension and a DC benefit with employer
match for employees hired between July 1, 2010, and February 1, 2018. 7
• The hybrid Pension Plus 2 Plan with a pension and DC benefit, and a 50/50 contribution
share between the employee and employer, for employees hired on or after February
1, 2018. 8 (The Pension Plus 2 Plan will close to new employees if the actuarial funded
ratio falls below 85% for two consecutive years.)
• The Defined Contribution Plan, which has an automatic employer contribution of 4%
of a participant’s compensation and an additional 100% match of up to 3% of a
participant’s compensation for employees hired after September 4, 2012; employees
who chose to transfer to the DC Plan in 2012; employees who were hired between
February 1, 2018, and June 30, 2024, who did not choose the Pension Plus 2 Plan; or
employees hired after July 1, 2024, who chose the DC plan. 9
• Those hired since 2012 receive a matching contribution of up to 2% of compensation
into a personal health care fund 401(k) plan.
6
Instead of the health care insurance benefit, new employees receive an employer match of up to 2% of their
compensation into a 401(k) or 457 account for health care.
7
https://www.legislature.mi.gov/documents/2009-2010/billanalysis/House/pdf/2009-HLA-1227-7.pdf
8
See https://www.legislature.mi.gov/documents/2017-2018/billanalysis/House/pdf/2017-HLA-0401-
A84AD1A8.pdf
9
https://www.legislature.mi.gov/documents/2023-2024/billanalysis/House/pdf/2023-HLA-5021-7C034DC4.pdf
House Fiscal Agency HBs 6060 and 6061 as reported Page 5 of 7
 State Employees’ Retirement System
2011 PA 264 required all employees in the State Employees’ Retirement System (SERS) who
were hired prior to December 31, 2011, to make an election between three options, effective
April 1, 2012: 10
• Remain in the DB pension plan and contribute 4% of their compensation until
retirement.
• Freeze existing pension benefits and move into a defined contribution (DC), 401(k)-
style plan with a flat 4% employer contribution for future service.
• Remain in the DB pension plan and contribute 4% of their compensation until attaining
30 years of service, then freeze existing pension benefits and move into a DC plan.
SERS has several different benefit plans depending on the hire date of employees:
• The Defined Benefit Classified Plan, a pension plan for employees who were hired
before March 31, 1997.
• The Defined Benefit 30 Plan, a pension plan for employees who were hired before
March 31, 1997, and elected to stay in the DB plan until attaining 30 years of service
before switching to the DC plan for future service.
• The DB/DC Blend Plan, a hybrid plan with a pension and a DC benefit for employees
hired before March 31, 1997, who elected to switch to the DC plan on