The Michigan Public School Employees' Retirement System (System or MPSERS) is a cost-sharing, multiple employer, state-wide, defined benefit public employee retirement plan governed by the State of Michigan (State) originally created under Public Act 136 of 1945, recodified and currently operating under the provisions of Public Act 300 of 1980, as amended. Section 25 of this act establishes the board's authority to promulgate or amend the provisions of the System. The board consists of twelve members- eleven appointed by the Governor and the State Superintendent of Instruction, who serves as an ex-officio member.
The System's pension plan was established by the State to provide retirement, survivor and disability benefits to public school employees. In addition, the System's health plan provides all retirees with the option of receiving health, prescription drug, dental and vision coverage under the Michigan Public School Employees' Retirement Act (1980 PA 300 as amended).
The System is administered by the Office of Retirement Services (ORS) within the Michigan Department of Technology, Management & Budget. The Department Director appoints the Office Director, with whom the general oversight of the System resides. The State Treasurer serves as the investment officer and custodian for the System.
The System's financial statements are available on the ORS website at Michigan.gov/ORSSchools.
Benefit provisions of the defined benefit pension plan are established by State statute, which may be amended. Public Act 300 of 1980, as amended, establishes eligibility and benefit provisions for the defined benefit (DB) pension plan. Depending on the plan option selected, member retirement benefits are determined by final average compensation, years of service, and a pension factor ranging from 1.25 percent to 1.50 percent. DB members are eligible to receive a monthly benefit when they meet certain age and service requirements. The System also provides disability and survivor benefits to DB plan members.
A DB plan member who leaves Michigan public school employment may request a refund of his or her member contributions to the retirement system account if applicable. A refund cancels a former member's rights to future benefits. However, returning members who previously received a refund of their contributions may reinstate their service through repayment of the refund upon satisfaction of certain requirements.
Employers are required by Public Act 300 of 1980, as amended, to contribute amounts necessary to finance the coverage of active and retired members. Contribution provisions are specified by State statute and may be amended only by action of the State Legislature.
Employer contributions to the System are determined on an actuarial basis using the entry age normal actuarial cost method. Under this method, the actuarial present value of the projected benefits of each individual included in the actuarial valuation is allocated on a level basis over the service of the individual between entry age and assumed exit age. The portion of this cost allocated to the current valuation year is called the normal cost. The remainder is called the actuarial accrued liability. Normal cost is funded on a current basis. The unfunded (overfunded) actuarial accrued liability as of the Sept. 30, 2019 valuation will be amortized over a 19-year period beginning Oct. 1, 2019 and ending Sept. 30, 2038.
The schedule below summarizes pension contribution rates in effect for fiscal year ended Sept. 30, 2020.
| Benefit Structure | Member | Employer | |
| Universities | Non-Universities | ||
| Basic | 0.0 - 4.0% | 26.03% | 19.41% |
| Member Investment Plan | 3.0 - 7.0% | 26.03% | 19.41% |
| Pension Plus | 3.0 - 6.4% | N/A | 16.46% |
| Pension Plus 2 | 6.2% | N/A | 19.59% |
| Defined Contribution | 0.0% | 19.74% | 13.39% |
Required contributions to the pension plan from [the employer] were [Table 1, Column C] for the year ended Sept. 30, 2020.
At June 30, 2020, [the employer] reported a liability of [Table 1, Column F] for its proportionate share of the MPSERS net pension liability. The net pension liability was measured as of Sept. 30, 2020, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation rolled forward from September 2019. [The employer]'s proportion of the net pension liability was determined by dividing each employer's statutorily required pension contributions to the system during the measurement period by the percent of pension contributions required from all applicable employers during the measurement period. At Sept. 30, 2020, [the employer]'s proportion was [Table 1, Column D] percent, which was [an increase / a decrease] of [XX.XX] percent from its proportion measured as of Sept. 30, 2019.
{If changes expected to have a significant effect on the measurement of the employer's proportionate share of the net pension liability had occurred between Sept. 30, 2020 and June 30, 2021, the employer should disclose information required by paragraph 80f of GASB Statement 68.}
For the year ending June 30, 2021, [the employer] recognized pension expense of [Table 1, Column S]. At June 30, 2021, [the employer] reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
| Deferred Outflows of Resources | Deferred Inflows of Resources | |
| Differences between actual and expected experience | $ [Table 1, Column H ] | $ [Table 1, Column M ] |
| Changes of Assumptions | [Table 1, Column J ] | [Table 1, Column O ] |
| Net difference between projected and actual earnings on pension plan investments | [Table 1, Column I ] | [Table 1, Column N ] |
| Changes in proportion and differences between Employer contributions and proportionate share of contributions | [Table 1, Column K ] | [Table 1, Column P ] |
| Employer contributions subsequent to the measurement date | [Employer provides] | [Employer provides] |
| Total | [Employer calculates sum] | [Employer provides] |
Contributions subsequent to the measurement date reported as deferred outflows of resources related to pensions resulting from employer contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2022. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:
| Deferred (Inflow) and Deferred Outflow of Resources by Year (To Be Recognized in Future Pension Expenses) | |
| 2021 | [Table 2, Column U ] |
| 2022 | [Table 2, Column V ] |
| 2023 | [Table 2, Column W ] |
| 2024 | [Table 2, Column X ] |
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.
Additional information as of the latest actuarial valuation follows:
Summary of Actuarial Assumptions
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Valuation Date: Actuarial Cost Method: |
Sept. 30, 2019 Entry Age, Normal |
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Wage Inflation Rate: |
2.75% |
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Investment Rate of Return: |
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- MIP and Basic Plans: |
6.80% net of investment expenses |
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- Pension Plus Plan: |
6.80% net of investment expenses |
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- Pension Plus 2 Plan: |
6.00% net of investment expenses | |
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Projected Salary Increases: |
2.75 - 11.55%, including wage inflation at 2.75% |
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Cost-of-Living Pension Adjustments: |
3% Annual Non-Compounded for MIP Members |
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Mortality: |
Retirees: |
RP-2014 Male and Female Healthy Annuitant Mortality Tables, scaled by 82% for males and 78% for females and adjusted for mortality improvements using projection scale MP-2017 from 2006. |
| Active Members: | P-2014 Male and Female Employee Annuitant Mortality Tables, scaled 100% and adjusted for mortality improvements using projection scale MP-2017 from 2006. | |
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Notes:
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The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan's target asset allocation as of Sept. 30, 2020, are summarized in the following table:
|
Asset Class |
Target Allocation |
Long-term Expected |
| Domestic Equity Pools | 25.0% | 5.6% |
| Private Equity Pools | 16.0 | 9.3 |
| International Equity Pools | 15.0 | 7.4 |
| Fixed Income Pools | 10.5 | 0.5 |
| Real Estate and Infrastructure Pools | 10.0 | 4.9 |
| Absolute Return Pools | 9.0 | 3.2 |
| Real Return/Opportunistic Pools | 12.5 | 6.6 |
| Short-Term Investment Pools | 2.0 | 0.1 |
| TOTAL | 100.0% | |
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*Long-term rates of return are net of administrative expenses and 2.3% inflation. |
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For the fiscal year ended September 30, 2020, the annual money-weighted rate of return on pension plan investment, net of pension plan investment expense, was 5.37%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.
A discount rate of 6.80% was used to measure the total pension liability (6.80% for the Pension Plus plan, 6.0% for the Pension Plus 2 plan, hybrid plans provided through non-university employers only). This discount rate was based on the long-term expected rate of return on pension plan investments of 6.80% (6.80% for the Pension Plus plan, 6.0% for the Pension Plus 2 plan). The projection of cash flows used to determine this discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on these assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.
The following presents [the employer]'s proportionate share of the net pension liability calculated using the discount rate of 6.80% (6.80% for the Pension Plus plan, 6.0% for the Pension Plus 2 plan), as well as what [the employer]'s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage higher:
| 1% Decrease 5.80% / 5.80% / 5.00% |
Current Single Discount Rate Assumption 6.80% / 6.80% / 6.00% |
1% Increase 7.80% / 7.80% / 7.00% |
| $[Table 1, Column E] | $[Table 1, Column F] | $[Table 1, Column G] |
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* Discount rates listed in the following order: Basic and Member Investment Plan (MIP), Pension Plus, and Pension Plus 2. Non-university employers provide Basic, MIP, Pension Plus and Pension Plus 2 plans. University employers provide only the Basic and MIP plans. |
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Detailed information about the pension plan's fiduciary net position is available in the separately issued MPSERS CAFR, available on the ORS website at Michigan.gov/ORSSchools.
{If the employer reported payables to the defined benefit pension plan, it should disclose information required by paragraph 122 of GASB Statement No. 68.}