City owes pension funds $5.7M

The city will owe a total of $5.69 million to its three pension funds by the end of next year.

The 2020 minimum municipal obligation comprises $2.67 million for the firefighters’ pension plan, $2.42 million for the police pension plan and $594,000 for the non-uniformed workers’ pension plan, according to Finance Director Omar Strohm.

The MMO consists of the city’s “normal cost as a percentage of payroll” plus an “amortization” amount, plus administrative expenses, minus employee contributions.

The normal cost is the annual cost to the employer associated with employees’ benefits earned that year, according to macinac.org.

The amortization cost reflects shares to be paid that year toward making up unfunded liabilities due to plan amendments that affect benefits or discrepancies between workplace experiences and plans’ actuarial assumptions, according to the American Academy of Actuaries.

The normal cost for the firefighters plan is 21.6 percent of payroll, while the amortization amount was $1.9 million and the administrative expenses $106,000, according to a worksheet in the packet distributed at a recent City Council meeting. Employee contributions to the firefighters’ plan were $182,000.

The normal cost for the police plan is 17.8 percent of payroll, while the amortization amount was $1.7 million and the administrative expenses $103,000. Employee contributions to the police plan were $211,000.

The normal cost for non-uniformed workers is 10.1 percent of payroll, while the amortization amount was $310,000 and the administrative expenses were $63,000. Employee contributions to the non-uniformed worker plan were $211,000.

The figures used to calculate the MMO were based on projections targeting the end of this year, Strohm told council.

The last actuarial evaluation was in 2017.

The city is expecting the state to contribute $1.5 million toward the 2020 MMO, although that’s not guaranteed, Strohm said.

There have been years in which the state hasn’t contributed anything and other years in which its contribution was unexpectedly high, he said.

The city will pay the remaining expenses from an earned income tax levied specifically to cover pension costs, as authorized by Act 205.

The firefighters and police pension plans are in the upper 60s as a percentage of full funding, while the non-uniformed plan is in the upper 80s, Strohm said.

The city will make quarterly payments next year toward the MMO, according to Strohm.

Mirror Staff Writer William Kibler is at 949-7038.


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