Per Public Act 202 of 2017, underfunded status for a defined benefit pension system is defined as being less than 60% funded according to the most recent audited financial statements, and, if the local unit of government is a city, village, township or county, the annually required contribution (ARC) for all of the defined benefit pension retirement systems of the local unit of government is greater than 10% of the local unit of government’s annual governmental fund revenues, based on the most recent fiscal year. The City of Ishpeming received a letter from the Michigan Department of Treasury dated October 1, 2018, stating the City of Ishpeming “is determined to be in underfunded status as defined by MCL 38.2803.” As reported on Michigan Department of Treasury Form 5572 filed for fiscal year 2017, the Municipal Employees’ Retirement System of Michigan (MERS) is determined to be underfunded, and a corrective action plan must be submitted within 180 days from the date of notification.
Per www.michigan.gov/msb, “Public Act 202 of 2017 requires the Governor to establish a Municipal Stability Board (MSB) to review corrective action plans. Local units of government whose defined benefit retirement systems (both pension and retirement health care) have been determined underfunded by the Treasurer will be required to submit a corrective action plan to the MSB if a waiver is not issued. Corrective action plans may include the development and implementation of corrective options for the local unit of government to address its underfunded status. The MSB will review and vote on the approval of a corrective action plan submitted by local units of government.
The board consists of all of the following members who are appointed by the Governor:
- One resident of this state representing state officials (serves as Chair)
- One resident of this state representing local officials
- One resident of this state representing employees and retirees
The MSB will also monitor each underfunded local unit of government’s compliance with the Act, including its adherence to the corrective action plan. At least every two years, the MSB must certify the local unit is in substantial compliance with the Act, if the MSB determines that an underfunded local unit of government is not in substantial compliance, the MSB shall within fifteen days provide notification and report to the local unit of government detailing the reasons for the determination of non-compliance with the corrective action plan. Finally, the Act also requires the MSB to review and annually update a list of best practices and strategies that will assist an underfunded local unit of government in developing a corrective action plan.”
Click the links below to view the MERS Corrective Action Plan approved by the Ishpeming City Council.