Eaton County pension funded at about 60%; actuary recommends amortization options

Marnie Daggett, regional manager for the Municipal Employees' Retirement System (MERS), told the Eaton County Ways and Means Committee on Sept. 10 that the county's pension plan is approximately 60% funded in the 2024 actuarial valuation and carries an unfunded accrued liability of roughly $78,800,000.

Daggett said the plan's smooth actuarial rate of return for 2024 was 3.79% while the actual market return was 7.28%, reflecting multi-year smoothing of 2022 losses. The MERS investment return assumption used for the valuation is 6.93%. She said MERS' most recent experience study prompted only minor assumption changes for most groups and that MERS' assumed return remains slightly below comparable PA 202 guidance of 7.0%.

Why it matters: The committee heard that the county is paying required employer normal costs plus sizable payments on legacy unfunded liability. Table 6 in the valuation showed total plan liabilities of about $199 million against assets slightly above $120 million, producing the 60% funding level. The plan is mature: benefit payments in 2024 totaled about $11.8 million while employer and employee contributions were smaller, creating a net cash outflow that increases reliance on investment returns.

Committee discussion focused on options to manage near-term budget pressure without imperiling long-term funding. Daggett said MERS has run amortization-extension scenarios: extending amortization periods for certain plan divisions (for example adding five years to a 15-year schedule) lowers the immediate required payment but can slightly increase total cost over the extended term. She said MERS and its actuaries review each extension carefully to ensure payments are not stretched beyond reasonable life-expectancy assumptions. The county's staff reported recent approvals to extend amortization for some divisions and said final division-level numbers would be provided after MERS completes calculations for changes approved the prior day.

Commissioners asked for historical and cash-flow context. Daggett pointed to the plan's Table 5 and Table 6, which break out active members, vested former employees, retirees and beneficiaries and show the present-value liability for each group. She said the plan's total liability for retirees and beneficiaries exceeds $148 million, and that the plan still carries legacy blocks of liability stemming from benefits earned decades ago. The valuation indicates that if current policy decisions and market assumptions hold, the county could reach a funded status near the county's target around 2041'2045 depending on amortization choices and additional contributions.

Commissioners and staff noted prior and ongoing changes the county has made to reduce future pension costs, including changes negotiated in collective bargaining and changes to benefit design for new hires; they also noted the county's recent decision to make additional principal payments designed to accelerate reduction of the unfunded liability.

What was decided: No final policy change was voted at the meeting on the actuarial report itself. Daggett presented the valuation and extension options; she and MERS staff will provide final extension numbers for the divisions approved by MERS. Commissioners and staff said they plan to use the extension option in combination with additional voluntary contributions, rather than rely solely on minimum payments, to limit long-term cost impacts.

Ending: The actuarial valuation will be used in the county's 2026 budget planning cycle; MERS will deliver division-level extension numbers and the county will present options for formal action at a later meeting if commissioners choose to adopt an amortization-extension plan or other funding changes.