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South Lyon pension plan 68% funded; MERS projects full funding around 2041
Summary
MERS presented the city’s 12/31/2024 valuation: funded ratio about 68% (down 1 point); assumed return retained at 6.93%; required contributions rise in the near term with projected peak contributions around $1.3 million and a projected 100% funded ratio around 2041 under current assumptions.
A MERS (Municipal Employees' Retirement System) actuarial presentation Thursday showed the City of South Lyon’s defined‑benefit pension plan was about 68% funded as of Dec. 31, 2024 and remains above the state corrective threshold.
Jamie Lefever, who presented the valuation, said the assumed rate of return remained at 6.93% for the 2024 valuation and that the funded ratio decreased by 1 percentage point from the prior year. Lefever cited three drivers of year‑to‑year changes: plan benefit changes, changes in actuarial assumptions or methods, and plan experience.
The valuation projects required employer contributions will increase in the near term; Lefever pointed to a roughly $60,000 increase in required contributions between July 1, 2025 and July 1, 2026 and noted employer/employee flows and investment income produced roughly $1.5 million in inflows versus about $1 million in outflows in the last year.
Under MERS’ smoothing and amortization approach, the plan is projected to climb toward full funding over time; Lefever said the funded ratio is projected to reach approximately 100% around 2041 barring another market downturn. She said the city’s amortization schedule and the five‑year smoothing of asset gains/losses help explain recent year‑to‑year movements.
Council members asked whether the 68% figure could affect the city’s bond rating. Lefever and city staff said when the city’s bond was rated in late 2022–early 2023, a funded level near 70% did not negatively affect the rating because of plan structure and closed plans for most employee groups; staff said they will provide additional detail to the council about bond‑rating sensitivity.
Council and staff discussed whether accelerating contributions would be prudent. Lefever noted the plan’s unfunded liability (table referenced) and estimated roughly $7.8 million would be required to immediately bring the plan to 100% funding; smaller incremental contributions could accelerate the timeline.
Next steps: staff offered to run additional scenarios and provide figures showing the fiscal tradeoffs of accelerated contributions for council consideration.
