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City staff report pension plan 89.4% funded; FY26 employer contribution to rise slightly
Summary
City staff summarized the actuarial valuation for the closed defined‑benefit pension plan, reporting an 89.4% funded ratio on an amortized basis and a recommended employer contribution of just over $3 million for fiscal 2026.
City finance staff said the municipality’s defined‑benefit pension plan remained well funded following its annual actuarial valuation and that the recommended employer contribution for the next budget year will increase slightly.
At a work session briefing, Jody, a city staff member who presented the actuarial results, said the valuation by GRS found the plan to be “89.4% funded” on the amortized (smoothed) basis and 87.7% funded on a market‑value basis as of June 30, 2024. Jody said that the actuarially determined employer contribution to be included in the FY26 budget is “just over $3,000,000,” about $38,000 more than the prior year.
The valuation and why it matters
The valuation is used to monitor funding progress and set the annual employer contribution. Jody explained that the report separates the “normal cost” (the annual benefit earned by active employees) from the amortized unfunded liability. The city chose to amortize the unfunded liability over a 23‑year schedule beginning in 2017, staff said.
Jody told the council the plan’s funding level is well above the state’s informal underfunded threshold; “the state of Michigan requires any fund or considers any fund that’s 60% or lower to be underfunded,” she said. Staff emphasized that, assuming the city continues to make the recommended contributions and investment returns are in line with assumptions, funding should remain strong.
Plan size and participant counts
Staff said the plan is closed to new employees and currently pays benefits to a substantial retiree population. “We currently have 467 retirees and beneficiaries, and the annual payments are $15,300,000 a year,” Jody said. Council members asked whether annual benefit outlays will decline as cohorts age; staff said the total payout could fluctuate depending on longevity, survivor benefits and any remaining active employees who later begin collecting benefits.
Related compliance items and next steps
Staff reminded council that the city contracts annually with an actuarial firm, and that an experience study of demographic and economic assumptions happens every five years; that study was in progress and expected to conclude in March. Staff also said the plan completed a peer audit of GRS’s work in 2024, meeting an eight‑year peer‑review requirement.
The actuarially determined contribution noted in the valuation will be incorporated into the FY26 budget materials as staff finalizes the proposed operating budget.
Ending
No formal action was taken at the work session. Council members asked clarifying questions; staff said they will continue to include the recommended contribution in the FY26 budget and will report back if the pending experience study results in changes to actuarial assumptions.
