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MERS valuation: city's closed defined‑benefit plan about 70% funded after surplus funds
Summary
The Municipal Employees Retirement System reported Mount Pleasant’s closed defined‑benefit divisions are about 70% funded when a surplus-funds division (just over $2 million) is included; MERS projected contributions and showed a path to 100% funding under current assumptions.
Representatives from the Municipal Employees Retirement System of Michigan (MERS) told the commission that the city’s multi-division defined-benefit plan is closed to new hires and that the overall funded level, including a surplus‑funds division, is roughly 70 percent.
Why it matters: The closed status means new hires no longer enter the DB plan; the city must continue funding benefits promised to existing employees and retirees and manage contributions to reach full funding on the chosen amortization schedule.
Key points - Closed divisions: Tony of MERS said all defined‑benefit divisions are closed to new hires; recent new hires participate in a defined‑contribution plan instead. - Funded level and surplus funds: Excluding a surplus/unassociated funds division the plan looked about 65% funded; when the surplus division (more than $2,000,000 in assets) is counted the overall funded level rises to about 70%. MERS staff said the surplus funds division holds additional city contributions that have no associated liabilities. - Participants and counts: MERS reported 235 total participants across divisions: about 70 active employees, 30 vested former members not yet collecting, 117 retirees and beneficiaries, and 18 non‑vested former members eligible for contribution refunds. - Contribution projections and policy: MERS provided six‑year projections showing required contributions rising under current assumptions and noted that paying more than the minimum annual determined contribution would shorten the amortization period and could reach 100% funded sooner; historical additional contributions were noted in 2019, 2020, 2022 and 2024.
Commission questions focused on amortization timing, the assumed long‑term return (6.93% used by MERS) and how the surplus funds division affects the city’s picture. MERS provided sensitivity tables showing projection alternatives at lower assumed return rates.
Ending: MERS’ valuation will feed the city’s actuarial disclosures and budget planning; staff and commissioners discussed whether the city should continue using surplus funds to smooth contribution requirements or accelerate funding.
