Washtenaw County CFO outlines fiscal risks and options on reopening pensions and retiree health care

Tina Gavalier, Washtenaw County chief financial officer, presented a comprehensive briefing on the county’s total compensation, the trajectory of fringe-benefit costs and the fiscal implications of reopening the county’s closed pension (WERS) and retiree health trust (VEBA).

Gavalier told commissioners that total compensation for the county’s budgeted 1,594 full-time-equivalent positions in 2025 was about $207.1 million, with 62% of that for wages and 38% for fringe benefits. She said fringe costs have risen faster than inflation over the last decade and identified active medical premiums, employer retirement contributions and retiree-health contributions as the largest cost drivers.

She highlighted the county’s statutory compliance options under Public Act 152 (the state hard-cap law) after Blue Cross Blue Shield submitted a 2026 renewal that exceeded the PA 152 hard cap by roughly $4.3 million. Gavalier presented three statutory options: (1) accept the cap and adjust plan design for employees, (2) set employee premium sharing equal to 20% (employer paying no more than 80%), or (3) seek an exemption and absorb the over-cap cost for the year. She said the board had used exemptions in prior years and that absorbing the full over-cap amount again would add several million dollars to the county budget.

On reopening retirement plans, Gavalier reviewed historical actuarial experience: the County’s defined-benefit pension plan (WERS) reopened in the 1990s and again around 2008, and the plan was closed at year-end 2013. She said actuarial reports show the pension funded ratio fell after prior reopenings and cautioned that reopening would reassign long-term risk to the employer. She noted the VEBA retiree-health trust fell from an overfunded position to about 93.5% funded after higher-than-expected claim experience and a $47.4 million actuarial increase in liabilities in the 2024 valuation; the county’s actuarially determined VEBA contribution more than doubled from 2025 to 2026 in the exhibits she presented.

Gavalier summarized national and state best-practice guidance (including MAPERS and Public Act 202 of 2017 recommendations): modernize benefit design before reopening, consider hybrid or tiered structures for new hires, adjust multipliers and retirement ages, and conduct experience studies before making changes. She recommended the board obtain the 2025 actuarial valuations and subsequent experience studies, explore modernized plan designs and require supplemental actuarial exhibits before any changes.

Commissioners asked detailed questions about trade-offs and implementation. Commissioner Somerville and others asked whether other jurisdictions offer employee choice between defined-benefit and defined-contribution plans; Gavalier said some systems offer choice but the actuary cautioned that splitting participation can raise unfunded liabilities. Commissioners pressed on the volatility of retiree-health costs and the impact on the county’s long-term fiscal picture. Several commissioners emphasized the need to balance recruitment/retention goals against budgetary sustainability and requested additional actuarial modeling and “what-if” scenarios.

Ending: The board did not vote to reopen pension or retiree-health plans. Gavalier recommended, and commissioners agreed, to obtain the 2025 actuarial valuations and experience studies and then return with supplemental exhibits and options for modernized plan designs and potential bargaining approaches.