Howell City Council Approves Additional MERS Contribution
December 28, 2020
![Howell City Council Approves Additional MERS Contribution](/dbphotos/displaywidth/8c39bbfdfc968ab5ffce3c27887f38b9/600/a.jpg)
By Jessica Mathews/News@whmi.com
Municipalities locally and across the state continue to grapple with ways to address unfunded employee pension liability and the City of Howell is no different.
The City’s obligation to the Municipal Employees Retirement System or MERS was largely discussed at a meeting in early December. Council adopted a resolution creating a MERS surplus division and approved a payment of $520,000 for deposit. During the City’s audit presentation and financial forecast, it was noted that the City’s pension funding ratio for the fiscal year was at 59%. That’s below the state’s threshold of 60% so the City had to request a waiver for 2020 – marking the first time the City had to request a waiver for the second year in a row. Waivers were previously requested in the 2017 and 2019 fiscal years.
A memo states in fall of 2019, the City requested that MERS provide an amount to achieve 61% funding, which equated to $174,724, so the City contributed $250,000. After that valuation was provided, the City still didn’t achieve 61% funding because assumption changes were made by MERS. It was requested that MERS provide an updated amount for 2020 to achieve the 61% funding. Thus the large, additional contribution of $520,000 was authorized to fund the surplus division.
The ever-changing assumptions didn’t sit well with Mayor Nick Proctor. He said it only highlights all of the problems with the MERS fiasco that he thinks every municipality struggles with. Proctor said the City asked MERS last fall to give them an amount to keep them at 61% funding and they contributed $75,000 more than that but then MERS changed the actuarial and now the City is underfunded. Proctor said it really ticks him off and questioned how the City is supposed to be able to budget when the numbers change every time the wind changes directions. Proctor said he knows they have to keep managing it as best they can but called it insanity – adding that $520,000 could have been used somewhere else to do something productive in the City but because MERS changed their actuarial, they have to contribute to that.
Utilizing the surplus division was recommended by MERS. It is said to allow the City greater flexibility for future allocations to established plan divisions and will be included in the City’s overall funded status. A memo states that MERS has reduced its anticipated growth from 7.75 to 7.35 and factors in different member assumptions such as mortality, projected retirement dates, disability and terminations among others.