BillCam

HOUSE BILL No. 5298

November 30, 2017, Introduced by Reps. Albert, Leutheuser, Howell, Glenn and Lower and referred to the Committee on Michigan Competitiveness.

A bill to create the protecting local government retirement

and benefits act; to provide the powers and duties of certain state

agencies and officials; to create a local government retirement

stability board; and to make appropriations.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 1. This act shall be known and may be cited as the

"protecting local government retirement and benefits act".

Sec. 2. The legislature finds and declares all of the

following:

(a) Nothing in this act or other laws of this state mandate or

otherwise require a local unit of government to create a retirement

system or to provide retirement pension benefits or retirement

health benefits for employees or former employees of the local unit

of government, or for other eligible beneficiaries.

(b) The provision by a local unit of government for a

retirement system or for retirement pension benefits or retirement

health benefits, or both, for employees or former employees of the

local unit of government, or for other eligible beneficiaries, is

an optional activity or service of the local unit of government and

not an activity or service required of a local unit of government

by this act or other laws of this state.

unit of government relating to a retirement system of the local

unit of government or a retirement pension benefit or a retirement

health benefit for employees or former employees of the local unit

of government, or for other eligible beneficiaries, is an activity

or service of the local unit of government and not of this state.

(d) That unfunded obligations of a local unit of government

relating to retirement systems, retirement pension benefits, and

retirement health benefits can adversely affect the ability of

local units of government to provide governmental services

necessary for the health, safety, and welfare of residents of the

local unit of government.

(e) That significant unfunded obligations of a local unit of

government relating to retirement systems, retirement pension

benefits, and retirement health benefits can adversely affect the

financial solvency of the local unit of government.

(f) The ability of local units of government in this state to

manage their obligations relating to retirement systems, retirement

pension benefits, and retirement health benefits while also

providing governmental services necessary for the health, safety,

and welfare of their residents is vitally necessary to the

interests of the residents of the local units of government and of

this state to assure satisfaction of contractual obligations while

also providing essential governmental services necessary for the

public health, safety, and welfare.

(g) That it is necessary to serve the interests of this state

and protect the credit of its local units of government by

authorizing assistance to local units of government in this state

in managing their contractual obligations and other commitments

relating to retirement systems, retirement pension benefits, and

retirement health benefits in a financially sustainable manner.

(h) Consistent with these mandates, the powers, duties,

functions, and responsibilities provided for under this act are a

necessary program and serve a compelling public purpose.

Sec. 3. As used in this act:

(a) "Annual report" means the most recent audited financial

statement reporting a local unit of government's liability for

retirement pension benefits and retirement health benefits as

determined under applicable government accounting standards of the

Governmental Accounting Standards Board.

(b) "Annual required contribution" means the sum of the normal

cost payment and the annual amortization payment for past service

costs to fund the unfunded actuarial accrued liability.

actions to be taken by a local unit of government to address and

resolve the underfunded status of that local unit of government.

(d) "Employee" means an individual holding a position by

election, appointment, or employment in a local unit of government.

(e) "Evaluation system" means the local government retirement

and benefits fiscal impact evaluation system created under section

5 to provide for the identification of, and corrective action plan

to resolve, the underfunded status of a local unit of government

under this act.

(f) "Former employee" means an individual who was an employee

who terminated employment with the applicable local unit of

government.

(g) "General fund operating expenditures" means the sum of all

governmental activity fund revenues of a local unit of government

as determined by the state treasurer based on applicable government

accounting standards of the Governmental Accounting Standards

Board. General fund operating expenditures do not include any fund

of the local unit of government that the state treasurer determines

based on applicable government accounting standards of the

Governmental Accounting Standards Board is a proprietary,

fiduciary, enterprise, or other restricted fund that may not be

expended to provide retirement health benefits or retirement

pension benefits.

(h) "Local government retirement stability board" or "board"

means the local government retirement stability board created in

section 7.

(i) "Local unit of government" means any of the following:

(i) A city.

(ii) A village.

(iii) A township.

(iv) A county.

(v) A county road commission.

(vi) An authority created under chapter VIA of the aeronautics

code of the state of Michigan, 1945 PA 327, MCL 259.108 to

259.125c.

(vii) A metropolitan government or authority established under

section 27 of article VII of the state constitution of 1963.

(viii) A metropolitan district created under the metropolitan

district act, 1929 PA 312, MCL 119.1 to 119.18.

(ix) An authority created under 1939 PA 147, MCL 119.51 to

119.62.

(x) A municipal electric utility system as that term is

defined in section 4 of the Michigan energy employment act of 1976,

1976 PA 448, MCL 460.804.

(xi) A district, authority, commission, public body, or public

body corporate created by 1 or more of the entities described in

subparagraphs (i) to (x).

(j) "Local unit of government" does not include this state, a

principal department of state government, a state institution of

higher education under section 4, 5, or 6 of article VIII of the

state constitution of 1963, a state agency, a state authority, or a

reporting unit under the public school employees retirement act of

1979, 1980 PA 300, MCL 38.1301 to 38.1437.

(k) "Normal cost" means the annual service cost of retirement

health benefits as they are earned during active employment of

employees of the local unit of government in the applicable fiscal

year, using an individual entry-age normal and level percent of pay

actuarial cost method.

(l) "Retirant" means an individual who has retired with a

retirement benefit payable from a retirement system of a local unit

of government.

(m) "Retiree health dependent" means an individual, other than

a former employee, who is eligible to receive retirement health

benefits.

(n) "Retirement benefit" includes a retirement health benefit

or retirement pension benefit, or both.

(o) "Retirement health benefit" means an annuity, allowance,

payment, or contribution to, for, or on behalf of a former employee

or a dependent of a former employee to pay for any of the following

components:

(i) Expenses related to medical, drugs, dental, hearing, or

vision care.

(ii) Premiums for insurance covering medical, drugs, dental,

hearing, or vision care.

(iii) Expenses or premiums for life, disability, long-term

care, or similar welfare benefits for a former employee.

(p) "Retirement pension benefit" means an allowance, right,

accrued right, or other pension benefit payable under a defined

benefit pension plan to a participant in the plan or a beneficiary

of the participant.

(q) "Retirement system" means a retirement system plan or

reserve fund that a local unit of government establishes,

maintains, or participates in and that, by its express terms or as

a result of surrounding circumstances, provides retirement pension

benefits or retirement health benefits, or both. Retirement system

does not include a state unit as that term is defined in section 2

of the public employee retirement benefit protection act, 2002 PA

100, MCL 38.1682.

(r) "Underfunded local unit of government" means a local unit

of government that is in underfunded status.

(s) "Underfunded status" means that the state treasurer has

determined that the local unit of government is underfunded under

the review provided in section 5 and the local unit of government

does not have a waiver under sections 6 and 8(1).

Sec. 4. (1) Beginning July 1, 2018, if a local unit of

government has opted or opts to offer or provide an employee of the

local unit of government, or a former employee first employed by

the local unit of government before the effective date of this act,

with a retirement health benefit, all of the following apply to the

local unit of government:

(a) The local unit of government shall not reopen a defined

benefit retirement system or reoffer any other defined benefit plan

to provide any new retirement health benefits after the effective

date that defined benefit retirement system or other defined

benefit plan has been closed to new hires.

(b) The local unit of government shall not provide the

component of retirement health benefits to a former employee and

his or her retiree health dependents for the period of time during

which the former employee is enrolled in the same component of

active or retiree group health or other welfare benefits offered

under another employer-sponsored program. The local unit of

government shall not provide the component of retirement health

benefits to a retiree health dependent for the period of time

during which the retiree health dependent is enrolled in the same

component of active or retiree group health or other welfare

benefits offered under another employer-sponsored program. The

local unit of government also shall not provide the component of

retirement health benefits to a former employee and his or her

retiree health dependents for the period of time during which the

former employee is eligible for, but does not elect to enroll in,

the same component of active or retiree group health or other

welfare benefits under another employer-sponsored program that is

at least as comparable to the component of retirement health

benefits available by the local unit of government. The local unit

of government shall not provide the component of retirement health

benefits to a retiree health dependent for the period of time

during which the retiree health dependent is eligible for, but does

not elect to enroll in, the same component of active or retiree

group health or other welfare benefits offered under another

employer-sponsored program that is at least as comparable to the

component of retirement health benefits available by the local unit

of government. The local unit of government shall determine, at its

sole discretion, if a component is comparable, including whether it

is offered on at least comparable terms, to the component of

retirement health benefits offered by the local unit of government.

unit of government may change a current or future retirement health

benefit provided under any applicable plan. If a collective

bargaining agreement entered into before the effective date of this

act clearly and expressly confers a fixed, unalterable right to a

vested retirement health benefit for an unambiguous duration, as

determined using ordinary principles of contract law, this act does

not impair that vested retirement health benefit for that duration.

(d) For a fiscal year of the local unit of government

beginning after June 30, 2019 and before July 1, 2020, at least 20%

of the normal cost must be funded during that fiscal year. For a

fiscal year of the local unit of government beginning after June

30, 2020 and before July 1, 2021, at least 40% of the normal cost

must be funded during that fiscal year. For a fiscal year of the

local unit of government beginning after June 30, 2021 and before

July 1, 2022, at least 60% of the normal cost must be funded during

that fiscal year. For a fiscal year of the local unit of government

beginning after June 30, 2022 and before July 1, 2023, at least 80%

of the normal cost must be funded during that fiscal year. For a

fiscal year of the local unit of government beginning after June

30, 2023, at least 100% of the normal cost must be funded during

that fiscal year.

(e) If the local unit of government has a normal cost funding

requirement under subdivision (d) that will cause an undue hardship

to that local unit of government by diverting significant resources

away from the provision of existing essential services to residents

and businesses, the local unit of government may request a

temporary waiver in whole or in part from the requirements of

subdivision (d) from the local government retirement stability

board. The local unit of government shall submit a waiver

application to the state treasurer, who shall review the

application and provide a recommendation to the board. The board

shall then vote on the waiver application. The board may only grant

1 waiver to the local unit of government under this subdivision.

Any waiver granted by the board under this subdivision must specify

the time period, not to exceed 5 years, that the waiver is in

effect, based on the specific financial circumstances identified in

the waiver application.

(f) The local unit of government or retirement system that

provides retirement health benefits shall require its actuary to

follow actuarial standards of practice adopted by the Actuarial

Standards Board for the actuarial review and valuation of a

retirement system that provides retirement health benefits for the

local unit of government.

(g) The local unit of government shall provide a supplemental

actuarial analysis before adoption of any material proposed benefit

change. The supplemental actuarial analysis must be provided by the

retirement system's actuary and must include an analysis of the

long-term costs of the material proposed benefit change. The

supplemental actuarial analysis must be provided to the decision-

making body that will approve the material proposed benefit change

at least 7 days before the material proposed benefit change is

adopted. If the material proposed benefit change is adopted, the

local unit of government must at least pay the incremental cost

increase in the annual required contribution associated with the

approved proposed benefit change. As used in this subdivision,

"material proposed benefit change" means an increase in the amount

of current or future retirement health benefits provided to persons

entitled to the retirement health benefits that would cause a

reasonable person in the position of a member of the governing body

of the local unit of government to conclude that implementation of

the increase would materially increase an unfunded liability of the

local unit of government or a retirement system of the local unit

of government.

(h) The local unit of government shall submit a summary

retiree health care report on an annual basis to the governing body

of the local unit of government and the department of treasury no

later than 6 months after the end of the local unit of government's

fiscal year. The governing body of the local unit of government

shall take a vote acknowledging the receipt of the summary retiree

health care report. The department of treasury shall post on its

website an executive summary of each summary retiree health care

report submitted to the department of treasury under this

subdivision. The executive summary must include the applicable

system's unfunded actuarial accrued liability for retiree health.

The department of treasury shall submit each executive summary

required under this subdivision to the senate and the house of

representatives appropriations committees and the senate and house

fiscal agencies not less than 30 days after posting.

(2) An irrevocable trust is authorized and created by this act

for each retirement system. An irrevocable trust established under

this subsection must at all times be established and administered

in accordance with section 115 of the internal revenue code of

1986, 26 USC 115. The normal cost funding under subsection (1)(d)

and any other prefunding of retirement health benefits by a local

unit of government for each retirement system must be deposited

into the irrevocable trust. All of the following apply to an

irrevocable trust:

(a) The governing board of each retirement system is the

grantor and shall administer the irrevocable trust created for that

retirement system in order to pay retirement health benefits. The

members of the retirement system board, or the governing body of

the local unit of government if there is no retirement system

board, shall act as the trustees of the irrevocable trust for that

retirement system.

(b) The trustees shall adopt a written trust agreement that

contains all of the following provisions consistent with this act:

(i) Recitals describing the creation and purpose of the trust.

(ii) Language reflecting the requirements of this subsection.

(iii) Sections outlining the management and operation of the

trust.

(iv) A description of the various accounts that carry out the

functions of the trust.

(v) Provisions setting forth the powers and duties of the

trustees.

(vi) Policies and procedures for administering the irrevocable

trust.

independent of the other retirement system trusts. The trustees may

contract with public and private entities for the provision of

bookkeeping, benefit payments, and other plan functions.

(d) Assets contributed to the irrevocable trust are

irrevocable and may not be refused, refunded, or returned to the

employer or employee making the contribution.

(e) The assets of the irrevocable trust are to be used solely

to perform this essential function of the local unit of government.

The trust shall only provide retirement health benefits as provided

under applicable law and pay fees and expenses for the

administrative costs in carrying out this essential governmental

function.

(f) The assets in the irrevocable trust must be invested in

accord with the public employee retirement system investment act,

1965 PA 314, MCL 38.1132 to 38.1141.

(g) The assets of the irrevocable trust and the ability of a

retirant to receive retirement health benefits is not subject to

execution, garnishment, attachment, the operation of bankruptcy or

insolvency laws, or other process of law and is unassignable.

(h) The assets of the irrevocable trust must be used

exclusively for retirement health benefits and must not be diverted

for a purpose other than the payment of retirement health benefits

and the administrative costs of providing retirement health

benefits.

(i) The governing board of a retirement system may from time

to time authorize the deposit into the irrevocable trust any

eligible funds on deposit within its retirement system for the

purpose of payment of eligible retirement health benefits.

Distributions from the irrevocable trust may be made to satisfy the

requirements of the retirement system for retirement health

benefits provided by the retirement system.

(j) The trustees shall cause the annual financial statements

of the trust to be prepared in accordance with generally accepted

accounting principles and an audit to be conducted of those

financial statements by a qualified independent certified

accounting firm for each fiscal year in accordance with generally

accepted auditing standards.

(k) The irrevocable trust is not considered to be invalid

because of any indefiniteness or uncertainty of the persons

designated as beneficiaries. The irrevocable trust is not

considered to be invalid as violating any existing law against

perpetuities, against suspension of the power of alienation of

title to property, or against trusts for the purpose of the

accumulation of income, but each trust may continue for the amount

of time that may be necessary to accomplish the purpose for which

it was created.

(l) All assets and income of the irrevocable trust are exempt

from taxation by this state or any political subdivision of this

state. Distributions from the irrevocable trust shall not be

treated as taxable income to former employees or their retiree

health dependents by this state or any political subdivision of

this state.

(m) A trustee of the irrevocable trust is not any of the

following:

(i) Personally liable for any liability, loss, or expense

suffered by the trust, unless the liability, loss, or expense

arises out of or results from the willful misconduct or intentional

wrongdoing of the trustee.

(ii) Responsible for the adequacy of the trust to meet and

discharge any obligation under applicable law.

(iii) Required to take action to enforce the payment of any

contribution or appropriation to the trust.

(n) The trustees of the irrevocable trust may be indemnified

by the trust against costs, liabilities, losses, damages, and

expenses, including their attorney fees, as more fully provided in

the respective trust agreements, unless the costs, liabilities,

losses, damages, or expenses arise out of or result from the

willful misconduct or intentional wrongdoing of a trustee.

(o) Any assets remaining in the irrevocable trust after all

payments for eligible retirement health benefits have been paid and

all other liabilities of the trust have been satisfied must be

distributed to this state, the local unit of government, or other

employers within the applicable retirement system if the employers

are organizations, the income of which is excluded under section

115(1) of the internal revenue code of 1986, 26 USC 115.

(3) As used in this section, "summary retiree health care

report" means a report that includes all of the following for each

retirement system of the local unit of government that provides

retirement health benefits:

(a) The name of the retirement system.

(b) The names of the retirement system's investment

fiduciaries.

(d) The retirement system's assets and liabilities and changes

in net plan assets on a plan-year basis.

(e) The retirement system's funded ratio based on the ratio of

valuation assets to actuarial accrued liabilities on a plan-year

basis.

(f) The assumed rate of return of the retirement system.

(g) The actual rate of return of the retirement system for the

previous 1-year period, the previous 5-year period, and the

previous 10-year period.

(h) The discount rate used by the retirement system.

(i) The retirement system's amortization method for unfunded

liability, indicating whether it is open or closed.

(j) The retirement system's amortization method, indicating

whether it is level percent or level dollar, and the assumed

payroll growth rate.

(k) The retirement system's remaining amortization time

period.

(l) The annual required contribution for the retirement

system, indicating the normal cost and unfunded actuarial accrued

liability.

Sec. 4a. Beginning July 1, 2018, if a local unit of government

has opted or opts to offer or provide an employee of the local unit

of government, or a former employee first employed by the local

unit of government before the effective date of this act, with a

retirement pension benefit, all of the following apply to the local

unit of government:

(a) The local unit of government shall not provide retirement

pension benefits through a defined benefit retirement system or

other defined benefit plan to an individual first elected or

appointed to an elective office of the local unit of government

after June 30, 2018 if the individual is new to the defined benefit

retirement system or defined benefit plan. As used in this

subdivision, "elective office" does not include a county sheriff.

(b) If a proposed benefit change is adopted, the local unit of

government must pay at least the incremental cost increase in the

annual required contribution associated with the approved proposed

benefit change. As used in this subdivision, "proposed benefit

change" means a proposal to increase the amount of current or

future retirement pension benefits received by individuals entitled

to those benefits.

benefit retirement system or reoffer any other defined benefit plan

to provide any new retirement pension benefits after the effective

date that defined benefit retirement system or other defined

benefit plan has been closed to new hires.

(d) Except as provided in this subdivision, beginning with

fiscal years that begin after December 31, 2020, the local unit of

government shall not use or apply a rolling amortization method, an

open amortization method, or other adjustable amortization method

for an unfunded actuarial accrued liability of retirement pension

benefits under a retirement system of the local unit of government.

An amortization period for an unfunded actuarial accrued liability

of retirement pension benefits under a retirement system of the

local unit of government may not be extended by the local unit of

government after December 31, 2020. The local unit of government

may request and the state treasurer may grant 1 extension of the

December 31, 2020 deadline under this subdivision to a new deadline

no later than December 31, 2025. The state treasurer may approve

the extension of an amortization period in effect as of the

effective date of this act, if, after consultation with, and

agreement by, the retirement system fiduciary, the local unit of

government requests an extension of the amortization period and the

state treasurer determines that the extension is in the best

financial interests of the local unit of government.

Sec. 5. (1) The state treasurer shall promulgate rules under

the administrative procedures act of 1969, 1969 PA 306, MCL 24.201

to 24.328, to establish standards for local units of government for

actuarial assumptions and other methods of valuation of retirement

systems that include, but are not limited to, standard ranges for

investment returns, salary increase rates, amortization of unfunded

liabilities, mortality updates, discount rates, and health care

inflation.

(2) The state treasurer shall create an evaluation system and

provide for review and oversight under this act of an underfunded

local unit of government beginning on the effective date of the

determination by the state treasurer that the local unit of

government is in underfunded status.

(3) Each year beginning after December 31, 2017, the state

treasurer shall determine the underfunded status of each local unit

of government.

(4) The state treasurer shall determine that a local unit of

government is in underfunded status if any of the following apply:

(a) The actuarial accrued liability of a retirement health

system of the local unit of government is less than adequately

funded, according to the most recent annual report, and, if the

local unit of government is a city, village, township, or county,

the annual required contribution for all of the retirement health

systems of the local unit of government is greater than 10% of the

local unit of government's annual general fund operating

expenditures, based on the most recent fiscal year. As used in this

subdivision, "adequately funded" means the following amounts for

the following fiscal years:

(i) For a fiscal year of the local unit of government

beginning after June 30, 2016 and before July 1, 2023, at least 30%

funded.

(ii) For a fiscal year of the local unit of government

beginning after June 30, 2023 and before July 1, 2028, at least 35%

funded.

(iii) For a fiscal year of the local unit of government

beginning after June 30, 2028 and before July 1, 2033, at least 40%

funded.

(iv) For a fiscal year of the local unit of government

beginning after June 30, 2033 and before July 1, 2038, at least 45%

funded.

(v) For a fiscal year of the local unit of government

beginning after June 30, 2038 and before July 1, 2048, at least 50%

funded.

(vi) For a fiscal year beginning after June 30, 2048, at least

80% funded.

(b) The actuarial accrued liability of a retirement pension

system of the local unit of government is less than adequately

funded, according to the most recent annual report, and, if the

local unit of government is a city, village, township, or county,

the annual required contribution for all of the retirement pension

systems of the local unit of government is greater than 10% of the

local unit of government's annual general fund operating

expenditures, based on the most recent fiscal year. As used in this

subdivision, "adequately funded" means the following amounts for

the following fiscal years:

(i) For a fiscal year of the local unit of government

beginning after June 30, 2016 and before July 1, 2023, at least 60%

funded.

(ii) For a fiscal year of the local unit of government

beginning after June 30, 2023 and before July 1, 2028, at least 65%

funded.

(iii) For a fiscal year of the local unit of government

beginning after June 30, 2028 and before July 1, 2033, at least 70%

funded.

(iv) For a fiscal year of the local unit of government

beginning after June 30, 2033 and before July 1, 2038, at least 75%

funded.

(v) For a fiscal year of the local unit of government

beginning after June 30, 2038, at least 80% funded.

of the liability of the retirement health system or retirement

pension system using data required under the rules promulgated

under subsection (1).

(d) The local unit of government demonstrates to the state

treasurer or local government retirement stability board and the

state treasurer or local government retirement stability board

determines that it does not have adequate financial resources to

make its annual required contributions for retirement pension

benefits or retirement health benefits, and the governing body of

the local unit of government requests to have underfunded status

for purposes of this act.

(5) The state treasurer shall post publicly on the department

of treasury website all of the following:

(a) The rules promulgated under subsection (1).

(b) The underfunded status of local units of government as

determined under subsection (3).

provided under sections 6 and 8(1), including any report provided

under section 6(4).

(d) Any corrective action plan approved under section 10.

(e) All declarations of financial emergencies within local

units of government under section 11.

(6) A local unit of government shall post publicly on its

website, or in a public place if it does not have a website, the

information as provided in subsection (5) that is applicable to

that local unit of government.

Sec. 6. (1) The state treasurer shall issue a waiver of the

determination of underfunded status for a local unit of government

if the state treasurer determines that the underfunded status is

adequately being addressed by that local unit of government based

on a review of relevant factors that include all of the following:

(a) The degree to which the local unit of government provides

retirement benefits.

(b) The local unit of government's proximity to the funded

ratio and expenditure percentage as provided under the evaluation

system.

address any underfunded status in prior fiscal years.

(d) The local unit of government's adherence to any prior

corrective action plans after a determination of underfunded

status.

(e) A review of the amount of any general fund operating

expenditures of the local unit of government that are dedicated to

the prefunding of retirement benefits.

(f) A review of the local unit of government's summary retiree

health care report prepared under section 4, including any trend

lines as provided in that report.

(2) The state treasurer shall rescind his or her waiver under

subsection (1) if the state treasurer determines that any of the

following have occurred or that there is a substantial likelihood

that any of the following will imminently occur:

(a) The underfunded local unit of government violates this act

or any mandatory financial controls in a manner that substantially

impairs that underfunded local unit of government's ability to pay

principal of and interest on municipal securities or other debt

when due and payable or its ability to adhere to a balanced budget.

(b) The underfunded local unit of government violates a

provision of a corrective action plan for the local unit of

government.

(3) If the state treasurer finds that the circumstances no

longer exist under which a waiver under subsection (2) was

rescinded, the state treasurer shall reverse the rescission as

provided in subsection (2) and reinstate the waiver.

(4) The state treasurer shall provide the local government

retirement stability board with a written report that sets forth

the reason for any waiver granted under subsection (1) or any

waiver reinstated under subsection (3).

Sec. 7. (1) The local government retirement stability board is

created within the department of treasury. Except as otherwise

provided in this act, the board shall exercise its powers, duties,

and functions independently of the state treasurer. The budgeting,

procurement, and related management functions of the board must be

performed under the direction and supervision of the state

treasurer. The department of treasury shall provide administrative

support to the board.

(2) The board consists of all of the following members:

(a) One resident of this state with knowledge, skill, or

experience in accounting, actuarial science, retirement systems,

retirement health benefits, or government finance appointed by the

governor.

(b) One resident of this state with knowledge, skill, or

experience in accounting, actuarial science, retirement systems,

retirement health benefits, or government finance appointed by the

governor from a list of 3 or more nominees submitted by the speaker

of the house.

experience in accounting, actuarial science, retirement systems,

retirement health benefits, or government finance appointed by the

governor from a list of 3 or more nominees submitted by the senate

majority leader.

(3) Of the members initially appointed by the governor under

subsection (2)(a) to (c), 1 member must be appointed for an initial

term of 4 years, 1 member must be appointed for an initial term of

3 years, and 1 member must be appointed for an initial term of 2

years. After the initial terms, members appointed by the governor

under subsection (2)(a) to (c) must be appointed for terms of 4

years.

(4) A vacancy for an unexpired term must be filled in the same

manner as the original appointment for the remainder of the term.

After the expiration of a term, a member may continue to serve

until a successor is appointed and qualified.

(5) The member of the board appointed under subsection (2)(a)

shall serve as the chairperson of the board.

(6) A majority of the members of the board authorized to take

an action constitute a quorum of the board for the transaction of

business on that action. The board shall meet not less than

quarterly and at the times and places within this state designated

by the chairperson. An action of the board must be approved by a

majority of the members authorized to take that action.

(7) A writing prepared, owned, used, in the possession of, or

retained by the board in the performance of an official function is

exempt from disclosure by the board under section 13(1)(d) of the

freedom of information act, 1976 PA 442, MCL 15.243.

(8) The board shall adopt bylaws for governance of the board,

which must, at a minimum, address the procedures for conducting

meetings, including voting procedures, and the requirements of its

members to attend meetings. Bylaws required by this section are not

subject to the administrative procedures act of 1969, 1969 PA 306,

MCL 24.201 to 24.328.

(9) The board may contract for professional services, as it

requires, and shall determine the qualifications for persons

providing those professional services it considers necessary.

(10) Members of the board serve without compensation but may

receive reimbursement for travel and expenses incurred in the

discharge of official duties. The members of the board and

contractors or agents of the board are subject to 1968 PA 317, MCL

15.321 to 15.330, and 1968 PA 318, MCL 15.301 to 15.310.

(11) A member of the board, and any person the board contracts

with, shall discharge the duties of his or her position in a

nonpartisan manner, with good faith, and with that degree of

diligence, care, and skill that an ordinarily prudent person would

exercise under similar circumstances in a like position. The board

shall adopt an ethics policy governing the conduct of board members

and officers and employees of the board.

(12) Board members shall take and subscribe to the

constitutional oath of office under section 1 of article XI of the

state constitution of 1963. The oath must be filed with the

secretary of state.

(13) As used in this section, "professional services" means

services that require a high degree of intellectual skill, an

advanced degree, or professional licensing or certification. Those

providing the professional services must be distinguished based on

their specialized knowledge, experience, and expertise.

Professional services include, but are not limited to, accounting,

actuarial, appraisal, auditing, investment advisor, and legal

services.

Sec. 8. (1) The board shall review a written report provided

by the state treasurer under section 6(4) and may rescind a waiver

granted by the state treasurer under section 6(1) or reinstated by

the state treasurer under section 6(3).

(2) The board shall monitor compliance of an underfunded local

unit of government with the requirements of this act and of any

corrective action plan for the underfunded local unit of

government. The board shall by October 1 of each year certify that

the underfunded local unit of government is in substantial

compliance with this act.

(3) The board may require an underfunded local unit of

government to provide verification of compliance with this section.

Sec. 9. The board may review and vote on the approval of

corrective action plans for a local unit of government that has

been determined to be in underfunded status based on what the board

determines is in the best financial interests of the local unit of

government.

Sec. 10. (1) The board shall review and vote on the approval

of a corrective action plan submitted by a local unit of

government. A local unit of government that is in underfunded

status shall submit a corrective action plan to the board within

180 days after the determination of underfunded status. The board

may extend the 180-day deadline by up to an additional 45 days if

the local unit of government submits a reasonable draft of a

corrective action plan and requests an extension. The corrective

action plan must be negotiated with active employees and retirants.

The governing body of the local unit of government shall approve

the corrective action plan before submission to the board. The

board shall approve or reject a corrective action plan within 45

days after it is submitted.

(2) A corrective action plan may include the corrective

options for correcting underfunded status as set forth in

subsection (8) and any additional solutions to assist with reducing

annual expenses or improving funding levels related to its

underfunded status to maintain and preserve retirement pension

benefits and retirement health benefits. A local unit of government

may also include in its corrective action plan a review of the

local unit of government's budget and finances to determine any

alternative methods available to assist in the ability to fund or

finance the retirement pension benefits or retirement health

benefits of the local unit of government.

(3) The board may review the inclusion of the corrective

options and additional solutions as described in subsection (8) as

part of its approval criteria to determine whether a corrective

action plan is designed to permanently remove the local unit of

government from underfunded status.

(4) Subject to any corrective action plan and any collective

bargaining agreements still in effect, the local unit of government

has up to 180 days after the approval of a corrective action plan

to implement the corrective action plan or otherwise negotiate with

active employees and retirants to achieve the necessary cost

reductions and funding improvements to permanently correct its

underfunded status in all future years.

(5) A local unit of government, if required by the board,

shall present written reports regarding its progress under this

section and shall permit the local government retirement stability

board to audit or inspect financial statements, actuarial reports,

revenue estimates, and any other documents, data, reports, or

findings that the board considers necessary to carry out this act.

(6) The board shall monitor each underfunded local unit of

government's compliance with this act and any corrective action

plan. The board shall adopt a schedule, not less than every 2

years, to certify that the underfunded local unit of government is

in substantial compliance with this act.

(7) Except as otherwise provided in this act, while any

corrective action plan is in effect for an underfunded local unit

of government, that local unit of government is not required to

submit any additional corrective action plan for approval.

(8) A corrective action plan of corrective options for the

local unit of government to address and permanently resolve its

underfunded status. Except as otherwise provided in this

subsection, this section does not mandate that the local unit of

government reduce retirement pension benefits or retirement health

benefits. The corrective options as described in this section may

include 1 or more of the following:

(a) Requiring additional employer contributions for retirement

pension benefits or retirement health benefits.

(b) Requiring additional employee contributions for any future

retirement pension benefits to be accrued, or for any applicable

retirement health benefits.

eligibility, calculation of benefits, copays, drug prescription

coverage, or other modification of provisions of an applicable

retirement system.

(d) Submitting to the electors of the local unit of government

a ballot question authorized by the laws of this state or the

charter of the local unit of government addressing the underfunded

status of the local unit of government for decision by the electors

of the local unit of government, including, but not limited to, a

ballot question on the imposition of a new millage or increasing or

renewing a millage levied by the local unit of government. A ballot

question described in this subdivision must comply with the

Michigan election law, 1954 PA 116, MCL 168.1 to 168.992. If a

ballot question described in this subdivision is a proposal on the

question of authorizing the issuance of bonds, imposing a new

millage, or increasing or renewing an existing millage, the ballot

question also must comply with the requirements of section 24f of

the general property tax act, 1893 PA 206, MCL 211.24f, and any new

or increased millage approved by the electors of the local unit of

government must be used only by the local unit of government for

purposes authorized by the electors and must not be attributed or

transmitted to or retained or captured by any other governmental

entity for any other purpose. A corrective action plan must include

alternative corrective options to be implemented by the local unit

of government if a ballot question provided for in the corrective

action plan is not approved by the electors of the local unit of

government.

(e) Limiting the annual amount the local unit of government

may pay toward the cost of providing retirement health benefits to

former employees and retiree health dependents. A limitation under

this subdivision may include 1 or more of the following:

(i) Implementing a maximum payment permitted for each coverage

category of retirement health benefits, subject to a specified

increase in coverage years beginning the succeeding calendar year,

based on the change in the medical care component of the United

States Consumer Price Index for the most recent 12-month period for

which data are available from the United States Department of

Labor, Bureau of Labor Statistics.

(ii) Requiring the local unit of government to pay no more

than 80% of the total annual cost for all retirement health

benefits it provides to its former employees and retiree health

dependents.

(iii) Implementing a cap on the total amount the local unit of

government may pay for the cost of providing retirement health

benefits.

(f) The levy of a property tax required to meet an

appropriation made by the local unit of government authorized under

the fire fighters and police officers retirement act, 1937 PA 345,

MCL 38.551 to 38.562, as permitted under that act.

(g) Requiring the local unit of government to require each

individual included in a beneficiary unit to enroll in Medicare

part A and part B when first eligible, or within 6 months after the

effective date of an applicable corrective action plan for each

individual included in a beneficiary unit that is past his or her

eligibility to enroll in Medicare part A and part B, in order to

qualify for retirement health benefits from a local unit of

government. The local unit of government shall require each

individual included in a beneficiary unit to provide the local unit

of government, in the form as the local unit of government

prescribes, the information as is necessary to confirm the

enrollment as required under this subsection. If an individual

included in a beneficiary unit does not enroll and submit the

information required, the individual is no longer eligible for any

retirement health benefits provided by the local unit of

government. If each individual included in a beneficiary unit is

eligible for Medicare, the local unit of government shall not pay

more than the total annual cost of a retirement health benefit that

is a supplement to reimbursements under Medicare for the

beneficiary unit.

(h) Requiring the local unit of government to not subsidize

retirement health insurance benefits for any employee who was first

employed by the local unit of government after a specified date in

the future.

(9) As used in this section:

(a) "Beneficiary unit" means a former employee who is entitled

to retirement health benefits and his or her retiree health

dependents.

(b) "Medicare" means benefits under the federal Medicare

program established under title XVIII of the social security act,

42 USC 1395 to 1395lll.

Sec. 11. (1) If any of the following events occur, the state

treasurer shall declare that a financial emergency exists within

the local unit of government for the purposes of section 9a of the

local financial stability and choice act, 2012 PA 436, MCL

141.1549a:

(a) The local unit of government cannot reach agreement on the

formation of a proposed corrective action plan.

(b) The board does not approve the corrective action plan that

is proposed by the local unit of government.

plan is not being implemented in a manner that will accomplish its

objectives.

(2) The state treasurer shall notify the governor in writing

of a declaration under subsection (1).

Sec. 12. (1) The board is a state board and its members are

state officers for the purposes of section 6419 of the revised

judicature act of 1961, 1961 PA 236, MCL 600.6419.

(2) The validity of the board is conclusively presumed unless

questioned in an original action filed in the court of claims

within 60 days after the effective date of this act. The court of

claims has original jurisdiction to hear an action under this

subsection. The court shall hear the action in an expedited manner.

The department of treasury is a necessary party in an action under

this subsection.

(3) The validity of a corrective action plan for a local unit

of government under section 10 is conclusively presumed unless

questioned in an original action filed in the court of claims

within 60 days after the effective date of the corrective action

plan. The court of claims has original jurisdiction to hear an

action under this subsection. The court shall hear the action in an

expedited manner. The department of treasury is a necessary party

in an action under this subsection.

(4) The court of claims has exclusive jurisdiction over any

action challenging the validity of this act or an action or

inaction under this act. The department of treasury is a necessary

party in an action under this subsection.

Sec. 13. A contract or agreement, or a provision of a contract

or agreement, entered into, modified, extended, or renewed after

the effective date of this act that conflicts with the requirements

or restrictions of this act is void.

Sec. 14. The provisions of this act apply notwithstanding a

contrary provision of a charter, articles of incorporation, or

other organizational document of a local unit of government, or of

a contrary provision of an ordinance or resolution of a local unit

of government.

Sec. 15. For the fiscal year ending September 30, 2018,

$1,500,000.00 is appropriated from the general fund to the

department of treasury for purposes of implementing this act.

Sec. 16. An obligation of a local unit of government that

relates to retirement pension benefits or retirement health

benefits is not an obligation of this state. This act does not

authorize the lending of the credit of this state. This act does

not authorize the diminishment or impairment of a contractual

obligation under section 24 of article IX of the state constitution

of 1963.