DALLAS -- A Michigan House committee will resume hearings after new lawmakers are seated on a plan to limit retirement healthcare benefits for municipal workers.
Michigan House Bills 6074 to 6086, introduced last week, would rein in unfunded liabilities in communities that have poorly funded programs promising retirement benefits to employees.
State Rep. Lee Chatfield, R-Levering, who chairs the House Local Government Committee, said on Tuesday in a press release that the committee didn't feel there was the proper time or information available to move forward on the rest of the package.
The decision to delay the vote pushes the politically sensitive issue on to the next legislature. It came after police and firefighters protested at the state capital Tuesday morning.
Chatfield said the House Committee on Local Government would only be taking up House Bill 6075 from the other post-employment benefit unfunded liabilities reform package.
The other bills in the package need more work and will be left to the next Legislature in the New Year, he said in a press release.
HB 6075, sponsored by state Rep. Dan Lauwers, R-Brockway Township, is a transparency measure that would strengthen requirements on local governments to report their pension and retiree health care costs to the state. It would also require local governments to develop and publicly share a plan to pay off their outstanding debt, if they are struggling and underfunded.
"This bill makes our local governments accountable to the people they serve and will prevent them from falling into this sort of financial crisis in the future," said Chatfield. "This is an important reform on its own, and it is a great start to solving the OPEB debt crisis facing our municipalities. Along with many of my colleagues, I look forward to fully addressing this issue in the future and finding ways to hold municipalities accountable and ensure our police and fire receive the benefits and care they deserve."
"This is an important reform that needs attention soon, and the bill sponsors and committee members who shined a light on this situation have taken an important first step," House Speaker Kevin Cotter, R-Mt. Pleasant, said in a press release. "OPEB debt did not get much attention before this bill package, but the effects of leaving it to grow unchecked will be felt statewide. If we do nothing, numerous cities, townships, villages, and counties across the state will go bankrupt. That will threaten our public safety, ruin local economies and possibly cause every retirement benefit our brave first responders currently have to be lost forever in bankruptcy court. Michigan needs a solution that addresses this problem, and I am proud of these representatives for stepping up to offer a starting point."
The Michigan Municipal League said in a statement that it asked the House to wait on changing retiree health care benefits for city workers until the new term, when it would have more time to work with newly elected representatives, Gov. Rick Snyder and other groups with a stake in the outcome.
The legislation would only affect local governments with retiree health costs that are less than 80% funded. If an entity is funded at or above the 80% benchmark, but falls below 80% funding and remains at that level for two consecutive years, it would be subject to the new laws.
The proposal would affect current employees and retirees. New employees hired after April 30, 2017 would be excluded from retiree health care coverage. Instead, a local unit of government could contribute up to 2% of an employee's pay to a tax-deferred Health Savings Account that could be used at retirement.
As of 2014, other post-employment benefit unfunded liabilities across the state were roughly $11 billion, according to Michigan Treasury. The legacy costs continue to increase rapidly because of older retirement plan design, an increase in life expectancy and runaway medical care inflation.
The Senate is also delaying vote on a separate proposal which would close the state's teacher pension system to all new hires and instead offer them 401(k)-style "defined contribution" plans until next January.
