Barry County Administrator Michael Brown Tuesday asked the County Commissioners to increase the amount the county pays into its pension fund this year to reduce the unfunded liability of county pension costs. He asked to transfer $1,750,000 from the 100 percent tax payment fund to the retirement fund. With the additional $574,615 already budgeted for the plan in 2016, the total $2,324,615 payment will reduce the unfunded liability by some 10 percent.
With very little discussion after Commissioner Jon Smelker said, “We own it,” and made the motion, the commission unanimously recommended the payment. The xommission will act on the request at its next regular board meeting.
The Michigan Employee’s Retirement System, the county’s pension administrator, in its most recent annual valuation Dec. 31, 2015, reported that the unfunded liability in the pension plan stood at $15, 849,382, Brown said.
The 100 percent tax payment fund has a mandated cap on the amount that must be held in the fund. Funds above the cap can be used for specified uses. At present, the amount above the cap in the fund is $2,436,556. After the payments, the balance would be $111,941 left above the cap, with $7 million below the cap.
The unfunded liability in pensions has been a county concern for some time. For several years, the county has been paying an extra $500,000 a year to reduce the amount of the liability. That was also done with funds above the 100 percent tax payment fund cap.
Commissioner Jim Dull asked Brown for a brief explanation of how the unfunded liability grew from $10 million in 2015, when the county was making extra payments.
Brown said this summer, when MERS held its five year review of assumptions they used in setting rates to see if they were consistent with reality, they found its two main assumptions, interest rates and the longevity of employees, did not match what really happened.
To adjust it, they reduced the assumption of an eight percent return on investments to 7.75 percent and also raised the life expectancy on its longevity tables, he said.
Commissioner Craig Stolsonburg said he hoped the employees would agree to adjust their pension benefits in the next few years, saying the funds could be used for many other programs vital to the county. Later, he added a caution saying: “In the long run, it will benefit them. If it continues the way it is, the pension plan will go broke and then they will have nothing.”
