House Committee Reports Latest MPSERS Reform Changes

Bob Kefgen's picture

The House Appropriations Committee has reported its version of the MPSERS reform legislation, SB 1040 (H-2). The House version, the fourth major revision to the bill, keeps most of the core set of changes for current employees that were in the Senate-passed bill, but changes the way in which the bill controls the MPSERS rate and what benefits will be available for new employees going forward.

For current employees, the House proposal is largely unchanged from the Senate's version of the bill. The language limiting retiree health coverage to those 60 and older and retroactively applying graded health insurance premiums to all employees has been removed. The major decision for current employees would be whether to pay an additional contribution to maintain a 1.5% multiplier on future years of service; keep the same contribution and accept a reduced 1.25% multiplier on future years of service; or freeze their pensions and opt for a 401k plan with a 4% employer contribution. In the House version, the rate of contribution necessary to keep a 1.5% multiplier was lowered from 5% for Basic and 8% for MIP down to 4% for Basic and 7% for MIP.

The House version of the bill also still contains language that will drop the retiree health insurance subsidy for both current and future retirees from 90% down to 80%. For final average compensation (FAC), though, the House removed language that would have prevented employer paid annuities, longevity pay, or merit pay from counting, meaning employees who receive those benefits would still be able to count them toward FAC. Additionally, the House introduced a proposal to use the 3% employee contributions that MPSERS members are currently paying to pre-fund the retiree health care system. This would help the state reduce the unfunded liability in the MPSERS system, which is currently $45.2 billion.

For districts, the bill locks in the MPSERS rate moving forward at the equivalent of 24.46%. However, the House changed the way that local districts pay that rate from being based on payroll to being based on current operating expenses. This change would mean that some districts could end up paying a higher MPSERS rate, while others may see some additional savings.

The bill is now on the House Floor awaiting final approval by the full chamber. The question now is whether the bill will be sent to conference committee to work out the House and Senate differences, or if lawmakers will broker a deal prior to the House passing the bill. That decision could affect both its timeline and which proposals currently on the table are most likely to make it into the final bill. Because of its links to the budget, though, the MPSERS bill will almost certainly wrap up before the legislature leaves on summer break.

A full, updated analysis of the House committee proposal is available here.