This afternoon the House Appropriations Committee reported two pension flexibility bills the League has been pushing: HB 5725 which amends the MERS statute to remove barriers to switching from defined benefit (DB) to defined contribution (DC) and SB 1129 which allows for bonding for costs from switching from DB to DC.

The committee passed version of HB 5725 was amended to allow a local unit to leave the MERS system with a vote of the governing body when switching from DB to DC. The local unit is also subject to review by the Department of Treasury to ensure it is in the local units “fiscal interest” to make the switch from DB to DC. The legislation would require MERS to treat amortization periods the same for open and closed systems. The bill also clarifies that this legislation does not affect existing vested pension benefits nor does it in any way inhibit collective bargaining under the Public Employee Relations Act (PERA).

SB 1129 allows for bonding for costs when switching from DB to DC. The committee passed version also allows for bonding for the unfunded accrued liability for health care as well.

Both bills now go to the House floor for consideration. We’re expecting the House to take action when it is in session on Thursday.

Samantha Harkins is the Director of State Affairs for the League and handles municipal finance and labor issues.  She can be reached at 517-908-0306 or email at [email protected]