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. 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.
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.
Authorizing Statutes
State Employees
Act 240 of 1943 is known as the State Employees Retirement Act:
AN ACT to provide for a state employees' retirement system; to create a state employees' retirement board and prescribe its powers and duties; to establish certain funds in connection with the retirement system; to require contributions to the retirement system by and on behalf of members and participants of the retirement system; to create certain accounts and provide for expenditures from those accounts; to prescribe the powers and duties of certain state and local officers and employees and certain state departments and agencies; to prescribe and make appropriations for the retirement system; and to prescribe penalties and provide remedies.
Section 38.2 establishes the administration of the system by a retirement board.
Except as otherwise provided in this section, the administration and management of the retirement system and the responsibility for making effective the provisions of this act are vested in a retirement board.
According to Section 38.3, the retirement board consists of 9 members including
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The insurance commissioner, the attorney general, the state treasurer, the deputy legislative auditor general, and the state personnel director;
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Two employee members of the retirement system, who shall be appointed by the governor. Not more than 1 employee member of the retirement board shall be from any 1 department, bureau, or agency of state government;
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The 2 retirant members shall be retirants of the retirement system, who shall be appointed by the governor.
Local Employees
Act 427 of 1984 is known as the Municipal Employees Retirement Act and its' passage creates the Municipal Employees Retirement System of Michigan. Section 38.1536 creates the retirement board, whose duties include establishing system provisions, arrange for audits and actuarial valuations, and appointing individuals to administer the MERS system. The board consists of 9 members including:
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Two members appointed by the retirement board with knowledge or experience in retirement systems, administration of retirement systems, or investment management or advisory services;
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One member who is a retiree of the system appointed by the board;
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Three members of the retirement system who are officers of participating municipalities or courts, who shall be designated as officer board members;
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Three employee members of the retirement system who are not officers of a participating municipality or court, who shall be designated as employee board members.
Educational Employees
Act 300 of 1980, the Public School Employees Retirement Act of 1979, establishes the Public Employees' Retirement System.
AN ACT to provide a retirement system for the public school employees of this state; to create certain funds for this retirement system; to provide for the creation of a retirement board within the department of management and budget; to prescribe the powers and duties of the retirement board; to prescribe the powers and duties of certain state departments, agencies, officials, and employees; to prescribe penalties and provide remedies; and to repeal acts and parts of acts.
Section 38.1322 creates the 11-member retirement board:
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One member who is a school system superintendent;
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One member working in a school system in a finance or operations management position, but who is not a school system superintendent;
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One retirant, retired from a classroom teacher position;
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One retirant, retired from a finance or operations management position;
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One administrator or trustee of a community college, which community college is a reporting unit;
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Two from the general public, 1 with experience in health insurance or actuarial science and 1 with experience in institutional investments. An individual appointed under this subdivision shall not be a member, deferred member, retirant, or retirement allowance beneficiary under this act;
Board Composition
Plan
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Board Size
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Appointed
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Elected
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Plan Members
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Ex Officio
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Michigan Public School ERS
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12
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11
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0
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6
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1
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Michigan State ERS
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9
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4
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0
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4
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5
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Municipal ERS of Michigan
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9
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3
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6
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7
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0
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Contributions
Per the U.S. Census, in FY 2021, employer contributions to Michigan state and local government pension plans were 5.31 percent of all state and local government direct general spending.
Constitutional Protections
'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