Wednesday, August 24, 2016

Michigan's Underfunded Pensions: A Tale of Two Counties

Michigan's Underfunded Pensions: A Tale of Two Counties [Michigan Capitol Confidential]:
"The state’s largest 100 municipalities owe more than $4.2 billion in unfunded pension benefits to their employees, and Michigan’s 83 counties add another $2.5 billion to the total.
Wayne County’s experience shows how this underfunding arose, while Oakland County shows the way out.
Most Wayne County communities run a defined benefit pension plan for their employees, and most of them are significantly underfunded.
Detroit was allowed to keep enrolling new employees in a smaller defined benefit plan after it left bankruptcy court and received a state bailout.
Foreseeing such problems, in 1994 Oakland County closed its defined benefit pensions to new hires, instead giving these workers contributions to their own retirement accounts.
The legacy pension system that serves county employees hired before that date is well-funded.
The pension systems of most cities in the county, meanwhile, are in much better shape than their counterparts in Wayne County.
At the end of 2015 fiscal year, Oakland County’s closed pension system held 98 percent of the assets it needed to pay retirees.
It has only $13 million worth of unfunded promises.
To put that in perspective, the county’s annual budget is more than $850 million.
...It’s a different story south of the border in Wayne County, however. 
There, the employee pensions are only 49 percent funded. 
Employees have been promised $1.66 billion in pension benefits.
But the county has just $815 million of what it should have to pay them, potentially leaving taxpayers on the hook for $845 million in unfunded liabilities..."

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