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Study Reveals 110 Michigan Cities Have Underfunded Pensions

(WWJ) After cuts in state aid through the lean years of the great recession, and a growing list of pensioners on the city budgets, some local governments are under water when it comes to funding retirement benefits for their employees.

Under a new law that requires local communities to report underfunded retirement benefits, the Michigan Department of Treasury revealed that more than 110 110 out of 490 local units of government have been identified as having an underfunded pension plan or retirement health care plan -- or both.

See the complete list of under performing communities HERE.

The list includes metro Detroit hubs like Southfield, Berkley, Flint, Centerline, Eastpointe, Mount Clemens, New Baltimore, Romeo, St. Clair Shores, Warren, Hazel Park, Grosse Ile, Hamtramck, Highland Park, Lincoln Park, Grosse Pointe Farms and Grosse Park Woods.

The report is meant to serve as a warning signal that it's time for cities in distress to work with the state, and their employees, to make sure they deliver what was promised.

"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.

Any city on the list must provide a plan to the Treasury Department 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


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