A new law requiring local units of government to report underfunded retirement benefits is being implemented, according to the Michigan Department of Treasury.
For the first round of reporting, the state Treasury Department has found more than 110 out of 490 local units of government have been preliminarily identified as having an underfunded pension plan or retirement health care plan, or both. The review was conducted as a part of the Protecting Local Government Retirement and Benefits Act.
"Collaborating with communities to identify underfunded retirement benefits is our focus," said Deputy State Treasurer Dr. Eric Scorsone, head of Treasury's State and Local Finance Group. "By working together, we can help ensure the benefits promised by communities are delivered to their retirees and help ensure that the fiscal health of communities allows them to be vibrant now and into the future."
Local units of government with a fiscal year that ended on June 30, 2017, or earlier, were required to report their pension and health care plan finances by Jan. 31, 2018. Entities with fiscal years ending after June 30, 2017, are required to report their retirement benefit plan finances six months after the end of their fiscal year and will be included in future rounds of reporting.
The identified local units may apply to the state Treasury Department for a waiver. In doing so, the local unit must approve a plan that demonstrates their "underfunded status" has been proactively addressed.
Local units that decline to file for a waiver or are denied a waiver must complete a corrective action plan to address their underfunded retirement benefits. Plans are reviewed and approved by the Municipal Stability Board, which is anticipated to have its first meeting in May 2018.
Passed by the Michigan Legislature and signed by Gov. Rick Snyder in December 2017, the Protecting Local Government Retirement and Benefits Act incorporates four phases for local units to use in addressing their fiscal health and the security of retirement benefits for retired municipal employees:
1. Transparency through reporting
2. Identification of potential problems
3. Review for fiscal health
4. Develop a corrective action plan
To learn more about the program or for a list of local units determined to have a preliminary "underfunded status," go to www.michigan.gov/localretirementreporting or follow @MiTreasLocalGov on Twitter.
Published: Wed, Mar 14, 2018
