Township Authority to Offer Benefits 

MCL 41.110b authorizes townships to provide retirement benefits, pensions and annuities, contract for group insurance and prepayment plan contracts for life, accident, dental care, vision care, health, hospitalization, and medical and surgical services and expenses; establish a cafeteria plan; or offer any other employment benefit authorized by state or federal law.

The statute authorizes the township to exercise these powers granted under the statute by ordinance. The purpose of the ordinance is to formally establish the provisions of the plan so that beneficiaries and the public generally will have access to those provisions, and appropriate administrative procedures will be followed. 

Sample Ordinances 

Group Insurance Plans (Other than Annuity or Pension Plans)
Pension Plans

Compliance with PA 106

The Public Employers Health Benefit Act, Public Act 106 of 2007, MCL 124.71 et seq., took effect October 1, 2007.  The Act has three major provisions:

• Public employers may join together to form a self-insured medical benefit pool.
• All public employers, including townships, must solicit bids every three years when renewing or continuing health insurance coverage for their employees.
• Insurance companies will be required to disclose medical claims data in certain circumstances to public employers.

For more information click [here].

Benefit Types

Health Insurance--Plans that pay for all or part of a person's health care bills.  The types of health insurance are group health plans, individual plans, worker's compensation, and government health plans such as Medicare and Medicaid.

Short-term Disability Insurance--A plan that provides benefits, often as a portion of salary, during a period of short-term disability.

Long-term Disability Insurance--A plan that provides income for an individual who has become disabled and is no longer able to work. The compensation provided is either a flat amount or based on a percentage of the regular income.

Life Insurance--A plan that pays out a set amount of money to specified beneficiaries upon the death of the individual who is insured.

Supplemental Insurance--Plans that cover expenses that are not paid for by a person's health insurance. Cancer insurance is a specific form of supplemental insurance that covers expenses that are not normally covered by health insurance but are specifically related to cancer treatments.

Options to Reduce the Cost of Health Benefits, Medical Expenses and Child Care

1) A health savings account (HSA) is an account established by the township for individuals who are covered under high-deductible health plans (HDHPs) to save for medical expenses that HDHPs do not cover. Contributions are made into the account by the individual or the township and are limited to a maximum amount each year. The contributions are invested over time and can be used to pay for qualified medical expenses, which include most medical care such as dental, vision and over-the-counter drugs. The funds are completely portable and are not tied to the township in any way.

2) A health reimbursement account (HRA) is an employer-funded plan that reimburses employees for incurred medical expenses that are not covered by the company's standard insurance plan. HRA accounts belong to the employer.  Typically, each employee gets an annual allocation of dollars and unused funds roll over from year to year as long as the employee is employed.  The money is usually forfeited if employment is terminated.

See Dave Williamson's Financial Forum on health savings accounts for more details by clicking [here].

Section 125 Plans

3) A flexible spending account (FSA) is a savings account that provides the account holder with specific tax advantages.  Set up by an employer for an employee, the account allows employees to contribute a portion of their regular earnings to pay for qualified expenses, such as medical expenses or dependent care expenses. There are limits to how much can be contributed to a FSA account per year. For medical expense FSA accounts, the limit is set by the employer, while the specified limit for dependent care accounts is $5,000 per year. These plans are funded on a yearly basis and any unused funds revert to the employer if unused by the employee. Savings for medical expenses can be used before the plan is fully funded creating a liability for the township.  However, child care expenses can only be expended as the the plan is funded.

4) A cafeteria plans is a plan that allows employees to choose from a variety of employer-provided benefits to formulate a plan that best suits their needs.  Plan options include health and accident insurance, cash benefits, tax advantages and/or retirement plan contributions. See Dave Williamson's Financial Forum on cafeteria plans for more details by clicking [here].

All of these plans are generally funded on a tax-free basis and distributed on a tax-free basis.

Retirement Plans

A defined benefit plan is an employer-funded retirement plan designed to pay a predetermined benefit based on an employee's salary and service.

A defined contribution plan is an employer-funded retirement plan. The income the plan provides is not predetermined or guaranteed, as it is with a defined benefit plan.  403(b) and 401(a) plans are defined contribution plans.

A deferred compensation plan is a tax-exempt compensation plan in which benefits, such as retirement benefits, are paid at a later time.  For example, a 457 plan is a deferred compensation plan. A 457 plan is similar to a 401k plan, except there are no employer matching contributions, and the IRS does not consider it a qualified retirement plan. Generally, state and local units of government are prohibited from using a 401k plan, which is a tax-qualified deferred compensation plan.

See Dave Williamson's Financial Forum on defined and deferred benefit plans for more details by clicking [here].