Governor Granholm Signs State Employee Retirement Act; Legislation Helps Address Structural Deficit in Fiscal Year 2011 Budget

FOR IMMEDIATE RELEASE

September 30, 2010

LANSING - Governor Jennifer M. Granholm today signed legislation she called for earlier this year to reform the state employee retirement system and reduce state employee costs in coming years.  Eligible state workers have until November 5 to indicate their intention to retire by January 1, 2011 under the provisions of this act. 

"This important reform legislation will save the state millions while providing a small financial boost to retiring employees," said Granholm. "This step, combined with the reforms made earlier this year to the school employees retirement system, help reduce our long-term costs and bring down spending." 

The legislation is estimated to save the state's general fund $60 million in fiscal year 2011 and millions more in the two subsequent fiscal years.  Savings estimates are based on an assumed 3,400 eligible state employees choosing to retire before January 1, 2011. 

Specifically, the legislation: 

• Provides an enhanced pension multiplier of 1.6 percent for classified, unclassified, legislative and judicial branch employees who are currently eligible to retire and choose to do so between November 1, 2010 and January 1, 2011.   
• Provides and enhanced pension multiplier of 1.55 percent for classified, unclassified, legislative and judicial branch employees whose combined age and years of service is 80 or greater or have at least 30 years of service who choose to retire between November 1, 2010 and January 1, 2011.  
• Beginning November 1, 2010, all state employees will contribute 3 percent of their salary to be deposited into an irrevocable health care trust created for purpose of funding retiree health care.  This requirement ends September 30, 2013.
• Amends the current retiree health care system to make it consistent with the new State Health Plan which took effect for new employees on April 1, 2010.  The state share for retiree health care is capped at 80 percent for employees hired after April 1, 2010.   

Governor Granholm first proposed retirement plans for both state and school employees in January as part of her comprehensive plan to transform state government.  It was formally presented to lawmakers on February 11 as part of the 2011 executive budget recommendation.  The governor signed the school employee retirement package into law on May 19, 2010.  More than 17,000 eligible school employees retired over the summer, creating more than $680 million in savings this school year, with expected savings of $3.1 billion over 10 years. 

The state employee retirement legislation was Senate Bill 1226, sponsored by Senator Mark Jansen (R-Gaines Township).  The bill was given immediate effect. 

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