Michigan

Overview

A large percentage of all public pension assets and participants associated with Michigan public pensions are related to the Michigan Office of Retirement Services, which administers five plans: the State Employees' Retirement System, Public School Employees' Retirement System, Judges Retirement System, State Police Retirement System, and Michigan Military Retirement Provisions; and the Municipal Employees' Retirement System of Michigan. The largest municipal retirement systems are the Retirement Systems of the City of Detroit.

The State Employees Retirement System administers pension, disability, health insurance and survivors benefits for substantially all state employees hired before April 1997. In 1997, the Michigan Legislature established a mandatory defined contribution plan for state employees joining after March 1997. The closed defined benefit plan is non-contributory for employees. The Public School Employees Retirement System administers pension, disability, health insurance, and survivors benefits for employees of public school districts, colleges, and universities in the state. Assets are managed by the Michigan Investment Board.

The Municipal Employees' Retirement System (MERS) is an independent, professional retirement services company that was created to administer retirement plans and other post-employment benefits for Michigan's units of local governments on a not-for-profit basis.

Plan Design

State employees hired since March 31, 1997 participate in a defined contribution plan. State employees hired previously participate in a defined benefit plan.

Teachers hired since February 1, 2018 may choose to participate in a default combination (DB+DC) hybrid plan or a defined contribution plan. Teachers hired between July 1, 2010 and January 31, 2018, as well as those hired previously who elect to join, participate in a combination (DB+DC) hybrid plan. Teachers hired before July 1, 2010 who do not elect to participate in the hybrid tier participate in a defined benefit plan.

Most local government employees participate in either a defined benefit plan or a combination (DB+DC) hybrid plan.

According to the US Government Accountability Office, 95 percent of employees of state and local government in Michigan participate in Social Security.

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Authorizing Statutes and Board Structure

MI Comp L § 38.3 establishes the State Employees’ Retirement board, which consists of 9 members. 

MI Comp L § 38.1322 establishes the Michigan Public School Employees’ Retirement System board, which consists of 12 members. 

MI Comp L § 38.1536 establishes the Municipal Employees’ Retirement System of Michigan board, which consists of 9 members. 

Details regarding the composition of these and other retirement boards is accessible via the Retirement and Investment Board Characteristics search tool located at the bottom of this page.

Fiduciary Duty/Prudence Standard

MI Comp L § 38.1133 states:

An investment fiduciary shall discharge his or her duties solely in the interest of the participants and the beneficiaries, and shall do all of the following: (a) Act with the same care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a similar capacity and familiar with those matters would use in the conduct of a similar enterprise with similar aims. (b) Act with due regard for the management, reputation, and stability of the issuer and the character of the particular investments being considered. (c) Make investments for the exclusive purposes of providing benefits to participants and participants' beneficiaries, and of defraying reasonable expenses of investing the assets of the system. (d) Give appropriate consideration to those facts and circumstances that the investment fiduciary knows or should know are relevant to the particular investment or investment course of action involved, including the role the investment or investment course of action plays in that portion of the system's investments for which the investment fiduciary has responsibility; and act accordingly. For purposes of this subsection, "appropriate consideration" includes, but is not limited to, a determination by the investment fiduciary that a particular investment or investment course of action is reasonably designed, as part of the investments of the system, to further the purposes of the system, taking into consideration the risk of loss and the opportunity for gain or other return associated with the investment or investment course of action; and consideration of the following factors as they relate to the investment or investment course of action (i) The diversification of the investments of the system. (ii) The liquidity and current return of the investments of the system relative to the anticipated cash flow requirements of the system. (iii) The projected return of the investments of the system relative to the funding objectives of the system. (e) Give appropriate consideration to investments that would enhance the general welfare of this state and its citizens if those investments offer the safety and rate of return comparable to other investments permitted under this act and available to the investment fiduciary at the time the investment decision is made. (f) Prepare and maintain written objectives, policies, and strategies with clearly defined accountability and responsibility for implementing and executing the system's investments. (g) Monitor the investment of the system's assets with regard to the limitations on those investments under this act. Upon discovery that an investment causes the system to exceed a limitation prescribed in this act, the investment fiduciary shall reallocate assets in a prudent manner to comply with the prescribed limitation. h) Prepare and maintain written policies regarding ethics and professional training and education, including travel, which policies contain clearly defined accountability and reporting requirements for the system's investment fiduciaries. 

Legal Protections of Retirement Benefits

'The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby." In Request for Advisory Opinion Regarding Constitutionality of 2011 PA 38, 806 N.W.2d 683 (Mich. 2011) (reducing or eliminating the statutory tax exemption for public-pension income did not impair accrued financial benefits; the accrued financial benefit of a pension plan is the pension income itself, not any tax exemption that might at some moment in time be attached to that income). (Ml CONST., Article IX, §24) Source: Robert Klausner, Esq., State Constitutional Protections for Public Sector Retirement Benefits

See also the following search tools:

More Data

• Public Fund Survey Summary of Findings
• Roll Call (NASRA members-only)