The Issue

As the task force for Responsible Retirement Reform for Local Government and lawmakers discuss strategies to address unfunded liabilities, MERS is committed to keeping you informed of any developing legislation that would affect public employee retirement plans and other post-employment benefits (OPEB).

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The Details

In an effort to bring local and state officials together with employee representatives to discuss unfunded long-term liabilities facing retirees and municipalities in Michigan, Gov. Rick Snyder has created the Task Force on Responsible Retirement Reform for Local Government.

Update - May 24, 2017

Bills were introduced in both the House and Senate yesterday that would close the Michigan Public School Employees Retirement System (MPSERS) Hybrid Plan. While this legislation does NOT affect local governments at this time, we will continue to monitor this effort closely as MERS plans could be affected in the future.

To view Senate Bill 0401, click here. To view House Bill 4647, click here.

Closing all Defined Benefit and Hybrid Plans and mandating to a Defined Contribution (401(k)-style) will cost taxpayers more according to the independent Senate Fiscal Agency analysis preformed last year when similar bills were introduced in Lame Duck. There would be a similar impact should such a mandate come to local governments, who already utilize various retirement plans including Defined Contribution, Defined Benefit and Hybrid Plans based on their unique workforce needs.

In fact, plans within MERS are on schedule to eliminate unfunded liabilities over a period of 23 years and over the past five years, 73% have taken additional steps to reduce their unfunded liabilities. We will continue to partner with customers to manage both their pension and OPEB liabilities, and believe legislative attention should focus on the local units experiencing the greatest fiscal stress, and not mandate a rigid cookie-cutter approach that eliminates flexibility.
MERS will continue to keep you updated on this effort. Please click here to send us your thoughts and feedback.

Update - May 17, 2017

While no formal recommendations have been made by the group at this point, the final meeting was last Monday May 8th. This has been an intense process where we feel we have added value by providing context, education and shared the many actions customers are taking to responsibly manage their unfunded liabilities. As more details become available, we are committed to keeping you updated.

One key legislative issue that we're monitoring closely is the effort to close the Michigan Public Employees Retirement System (MPSERS) hybrid plan. Last year, a similar proposal was made in Lame Duck, and the Senate Fiscal Agency estimated that such a move would result in an additional $33 billion in costs to taxpayers over 30 years; and cost $591 million in the first year alone. The entire analysis can be found here.

Some have advocated for closing all defined benefit retirement plans, including those for local governments. If such a mandatory legislative initiative were passed, MERS customers could experience similar results as the MPSERS estimates. The key cost impact related to closing all defined benefit and hybrid plans to new entrants is the effect on the plan's cash flows, which ultimately results in the asset allocation becoming more conservative. This results in lower investment income over-time, which means higher contributions in both the short and long-term. It has been estimated that this could increase employer contributions between 20 and 30 percent.

Update - April 13, 2017

An Update on the Responsible Retirement Reform Task Force
Earlier this year, Governor Rick Snyder announced the creation of the Responsible Retirement Reform Task Force and asked MERS CEO Chris DeRose to participate. The group has met several times since February and the focus of the meetings so far has been sharing information on how pension and retiree health care plans are currently being administered, and what issues should be addressed by the task force.

Thank you for your feedback, and please continue to provide it! Chris has made an effort to share your thoughts and concerns with the task force, and will continue to do so.

Key themes we have heard from you include:

    1) The need to provide awareness and information to key decision makers of the actions that you have already taken to manage your unfunded accrued liability. It is clear that more education of policy makers is needed in this area.

    2) One-size doesn’t fit all – each municipality has its own unique challenges and that should be taken into consideration.

    3) Ensure that there aren’t unintended consequences of recommended reforms. Recruitment of qualified employees and workforce management are key areas that may be impacted by recommended changes.

To date, no recommendations have been formulated. However, it is clear that OPEB is the bigger issue and there may be a need for additional reporting and transparency. MERS will continue to keep you updated on the activities of the task force here.

Again your ongoing feedback and thoughts are critical in this process! Please click here to send us your thoughts and feedback..

For a print version of the myth vs facts sheet, click here.

Task Force Members

  • David Breen, retired managing partner at PricewaterhouseCoopers
  • Ben Carter, executive vice president and interim leader of East Group Operations for Trinity Health
  • Rep. Tom Albert (R-Lowell)
  • Rep. Andy Schor (D-Lansing)
  • Sen. Jim Stamas (R-Midland)
  • Sen. Rebekah Warren (D-Ann Arbor)
  • Chris DeRose, Municipal Employees' Retirement System
  • Judy Allen, Michigan Townships Association
  • Steve Currie, Michigan Association of Counties
  • Tony Minghine, Michigan Municipal League
  • Mark Cook, Blue Cross and Blue Shield of Michigan
  • Bob Daddow, Deputy Oakland County Executive
  • Paula Zelenko, Burton Mayor, a former state House member
  • Mark Dochety Michigan Professional Firefighters
  • Ken Grabowski, Police Officers Association of Michigan
  • Dave Hiller, Michigan Fraternal Order of Police
  • Mike Sauger, Michigan Association of Police Organizations
  • Nick Ciaramitaro, AFSCME
  • Mary Schulz, MSU Extension Center Associate Director
  • Michael VanOverbeke, Michigan Association of Public Employee Retirement Systems
  • The governor's ex-officio members include state Treasurer Nick Khouri, Department of Insurance and Financial Services Director Pat McPharlin and Strategic Policy Director John Walsh.

 

In The News

MERS honored for commitment to Retirement Readiness

April 26, 2017 - The Municipal Employees' Retirement System of Michigan (MERS) was honored for its commitment to participant education and communication at the 2017 Eddy Awards sponsored by Pensions & Investments. Read More.

Snyder creates task force to address pension reform

February 7, 2017 - Gov. Rick Snyder on Monday announced the formation of the Task Force on Responsible Retirement Reform for Local Government to address unfunded long-term liabilities for retirees and municipalities. Read More.

Snyder forms task force to handle unfunded liabilities

February 6, 2017 - Michigan Gov. Rick Snyder is setting his sights on unfunded pension and retiree health care liabilities that experts warn could cripple local governments, creating a task force to develop a "responsible retirement reform" agenda by spring. Read More.

Retiree health care, pensions focus of new Gov. Snyder task force

February 6, 2017 - Two months after lame-duck efforts to address public retiree health care costs at the local level folded, Gov. Rick Snyder has formed a task force to study the issue. Read More.

Michigan leads effort to shift workers away from pensions

February 6, 2017 - Struggling under the weight of pension and health care obligations, Michigan lawmakers appear ready to take another whack at public employee benefits — a move that reflects renewed determination to shift workers to 401(k)-style retirement systems, even if it happens in baby steps. Read More.

Local Government Employee Retiree Benefits Get Task Force

February 6, 2017 - Governor Rick Snyder on Monday named a 20-person task force, including four legislators, to head up "responsible retirement reform" and address problems with pension and health care costs facing local governments statewide. Read More.

MERS' strong 2016 investment return strengthens long-term municipal pension plans statewide

January 26, 2017 - Investment returns reached 11.10 percent for the majority of Michigan's
local government retirement plans in 2016, thanks to the... Read More.

Lame duck update: What's moving through the legislature and what's not

December 12, 2016 - It's time to see which bills are dead, which are "extremely sleepy" and which are alive in these final days of lame duck. Read More.

Public retirement cuts would hit hard in Lansing

December 5, 2016 - ...lines, from making Michigan a right-to-work state to taxing pension income to asking state employees to pay more to maintain full pension benefits. Read More.

Senator David Knezek testifies on Pension Reform (video)

November 30, 2016 - "The question that we're not asking ourselves is, 'What type of a retirement, what type of livelihood do we want to provide for Michigan workers?' We may be able to get our unfunded liabilities down to zero if we ask our retirees to live in poverty; if we ask our retirees to work until they're dead. That's not something that I want on my conscience." I am, and will remain, opposed to any effort to eliminate pensions for Michigan school employees. Read More.

Michigan municipal retirees could see decreased health benefits under new bills

December 1, 2016 - Rumors of health care changes for municipal retirees swirled into the realm of legislation on Wednesday with the introduction of a dozen house bills on the subject. Read More.

Michigan Senate panel votes to close school pensions to new members

November 30, 2016 - The Republican-controlled Senate Appropriations Committee voted 9-8 Wednesday to close the school retirement system to new members, despite expert testimony from the administration of Gov. Rick Snyder and others that the move will cost billions. Read more.

Snyder officials: Teacher pension plan to cost billions

November 30, 2016 - The Senate has put off a vote on a controversial bill that would switch new teachers to a 401(k)-style retirement plan that is estimated to cost billions to Michigan tax payers. Read more.

Ciaramitaro: Closing the pension system would be a disaster

November 21, 2016 – We keep hearing that traditional pensions are "unsustainable" and in crisis. While it is true that many public pensions around the nation are still recovering from the Great Recession, the fact is that most are seeing their bottom lines improve and many are doing quite well. Read More.

Poleski Hoping For Municipal Retirement Reforms Next Month

November 21, 2016 – However, he said MML is interested in having a conversation about municipal finance and would like to have a seat at the table. When asked if a proper conversation could happen during lame duck, he said: "That is a very short window of time." Read More.

Are Local Government Retirement Reforms On The Horizon?

November 1, 2016 …because it's a "complicated, complex issue," Mausolf said, "time and care should be taken to ensure that there isn't any unintended consequences for our public workers."Read more.

Talk Rife Of Senate Moving New School Employees To 401k

October 28, 2016 – The hybrid portion is 100 percent funded," Ms. Vanden Bosch said. "Nothing you do to new employees can reduce that legacy liability. Read more.

Leelanau County budget approved

October 19, 2016 – Leelanau officials happy with proposed budget... Read more.

County board approves 2017 spending plan

October 20, 2016 – In addition, retiree health care obligations are "trending positive with lower budgeted costs," Read more.

MERS submits op-ed to Crain's

October 20, 2016 – MERS CEO, Chris DeRose submits and op-ed to Crain's on the municipal retirement landscape in Michigan. Read more.

MERS submits op-ed to the Lansing State Journal

October 13, 2016 – MERS CEO, Chris DeRose submits an Op-Ed to the Lansing State Journal to add additional context to articles written on unfunded pension liabilities. Read more.

Study Finds Pension, OPEB Costs Manageable for Most Governments

October 5, 2016 – A recent study from the Center for Retirement Research at Boston College indicates liabilities for most governments are manageable. Read more.

MERS submits letter to Traverse City Record Eagle editor

October 3, 2016 – MERS CEO, Chris DeRose submits a letter to the Traverse City Record Eagle responding to an editorial: "Unfunded pensions could cripple the state." Read more.

Petoskey News: Pension positions: Where area governments stand with retirement liabilities

August 3, 2016 – MERS, in our opinion, do a good job of keeping track of where you are and making recommendations," said Tom Cannon, city administrator in East Jordan. Read more.

Saginaw shifting $72 million city-managed police pension fund to MERS

May 12, 2016 – "They have demonstrated a better return on investments and lower management fees," Jordan said. "In addition to that, the administrative costs that we are doing in-house, we'd be outsourcing that. So there would be an internal saving with that." Read more.


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