Bill
HB 5021
MPSERS changes default new school employees (post-June 30, 2024) to Tier 1 Pension Plus 2 instead of Tier 2, unless they elect Tier 2 within 75 days; elections are irrevocable.
Status & key dates
- Sponsor: Rep. Matt Koleszar. Passed both chambers (House Oct–Nov 2023) and enacted as Public Act 250 of 2023. Approved by governor Nov 29, 2023; filed with Secretary of State Nov 30, 2023. Effective date: February 13, 2024.
- Operative change applies to employees who first work for a reporting unit after June 30, 2024 (see “Key provisions” below).
Purpose / intent
- Change the default retirement-plan enrollment for newly qualified participants in the Michigan Public School Employees Retirement System (MPSERS) from Tier 2 (generally a defined contribution/401(k)/457 arrangement) to Tier 1 (the Pension Plus 2 hybrid plan combining a defined‑benefit pension component and a defined‑contribution component), unless the employee affirmatively elects otherwise within the statutory election period.
Key provisions
- Maintains existing 75‑day election window (from first payroll date) during which a newly qualified participant must elect Tier 1 (Pension Plus 2) or Tier 2 (DC). Elections are irrevocable.
- For persons who first became qualified participants:
- On or after Jan 31, 2018 and before July 1, 2024: failure to elect continues to default them to Tier 2 (DC).
- After June 30, 2024: failure to elect will default them to Tier 1 (Pension Plus 2). Such participants are also considered qualified participants under Tier 2.
- Requires ORS/retirement system to collect appropriate member and employer contributions consistent with the elected/default tier and to reconcile contributions when elections change.
- Contains a “qualifying event” safety valve: if certain actuarial funding thresholds are breached (actuarial funded ratio <85% for two consecutive years, subject to exceptions), newly hired participants after the effective date of that event would be Tier 2 only.
What the tiers mean (practical differences)
- Tier 1 / Pension Plus 2: Hybrid DB + DC. Employer and employee contribute to the DB component (split evenly); DC component exists with employer match rules (employer matches 50% of employee DC up to 1% in PP2).
- Tier 2: DC-only structure (employee 457 elective contributions; employer makes a mandatory 4% contribution and may match up to 3% to a 401(k) account).
Who is affected
- New hires in MPSERS reporting units: public school districts, intermediate school districts, public school academies, community colleges, and other reporting units that participate in MPSERS (includes many substitute, temporary, and regular employees unless excluded by statute).
- Local employers (school districts, ISDs, PSAs, community colleges) and the State (through school-aid offsets) are fiscally affected.
Fiscal impact / implications
- Overall fiscal impact: indeterminate — depends on how many new hires fail to elect and therefore default into Tier 1 versus those who would have chosen Tier 1 anyway.
- Per‑employee estimated change in “normal cost” (illustrative):
- State: Tier 1 ~2.83% of compensation vs Tier 2 ~4.00% (Tier 1 saves the state ~1.17% per shifted payroll dollar under School Aid Act section 147e).
- Local employers: Tier 1 ~4.37% vs Tier 2 ~3.00% (local cost increase ~1.37% per shifted payroll dollar).
- Combined current total cost: Tier 1 ~7.20% vs Tier 2 ~7.00% (difference ~0.2 percentage point).
- Long‑term risk: higher participation in PP2 could increase exposure to DB‑related actuarial risk (UAAL). As of FY2022 valuation, Pension Plus 2 was reported as 105.9% funded.
Procedural notes
- The statute continues to allow a mechanism to revert new hires to Tier 2 only if the plan’s funded ratio materially deteriorates (the “qualifying event” trigger).
- The bill preserves the requirement that the retirement system provide election forms and benefit option descriptions and that elections be documented within the 75‑day window.
(Notes: multiple committee reports and fiscal analyses informed this summary. A separate, unrelated House bill using the same bill number appeared in 2025 concerning gaming registration; that is not part of the MPSERS amendment summarized above.)
Compiled from official sources — confirm details with the bill’s official record.
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