Unfunded Accrued Liability About MERS We are a nonprofit - - PDF document

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Unfunded Accrued Liability About MERS We are a nonprofit - - PDF document

Jul 09, 2023 29 likes •319 views

Unfunded Accrued Liability About MERS We are a nonprofit organization, independent from the State, that has helped provide retirement plans for municipal employees for more than 65 years 2,000+ N umber of plans MERS administers 800 + Number

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Unfunded Accrued Liability

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About MERS

We are a nonprofit organization, independent from the State, that has helped provide retirement plans for municipal employees for more than 65 years

2,000+

Number of plans MERS administers

800 +

Number of Michigan municipalities we partner with

100,000

Number of MERS participants we serve

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How We Help

  • We provide one-stop access to shared

professional retirement services

  • MERS offers a range of customizable plans, which

employers can choose from to fit their budget and provide long-term sustainability for their employees

  • We have fiscal best practices and cost-reducing
  • ptions that assist members
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Distribution of Funded Percentage

Our Defined Benefit Plan is a multiple-employer plan

  • Assets are pooled for investment purposes only
  • Separate trusts are maintained for each individual

employer

  • We do not borrow from one municipality’s account to

cover another municipality’s obligation

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Funding Concepts

  • State statute requires that pension plans be pre-funded,

meaning regular contributions for each worker are made into the retirement fund during the course of that worker’s career

  • Set aside money now to pay for the benefit payments later
  • Investment income helps pay for the benefits
  • OPEB plans have historically not been pre-funded,

however some employers have setup funding vehicles to help advance-fund the benefits

Basic Funding Equation

Contributions

Investment Income

Benefit Payments

Expenses

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Funding Concepts

The employer contribution rate is made of up two parts:

  • 1. Employer Normal Cost – Present value of benefits

allocated to the current plan year less any employee contribution

  • 2. Amortization Payment of Unfunded Accrued Liability –

Payment to reduce any shortfall between liability for past service and assets

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What is Unfunded Liability?

Unfunded liability is the difference between a pension or OPEB plan’s estimated benefits and assets that have been set aside to pay for them

  • The dollar value of the benefits is actuarially determined

each year

  • Assets are held in a trust and are professionally

managed over the years

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Why Do Unfunded Liabilities Occur?

  • Benefit improvements
  • When municipalities don’t meet the minimal

required contributions as determined by the actuary

  • Experience of the plan (investment experience

and demographic experience)

  • This is the difference between what actually happens

in the plan compared to the actuarial assumptions

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EVIP Category 3 Collaborating for Our Members

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EVIP Category 3

EVIP Category 3 addresses unfunded accrued liabilities

Requires local units of governments with unfunded accrued liabilities in pensions or other post employment benefits to submit a plan to lower liabilities

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EVIP Category 3 Template

Our goal is to offer you a quick and easy way to report what your UAL Plan to Treasury

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Pension UAL – Plan Design

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Pension UAL – Plan Design

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Pension UAL – Plan Design

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Pension Liability – Funding

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Pension Liability

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OPEB Liability – Plan Design Changes

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OPEB Liability – Plan Design Changes

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OPEB Liability – Defined Contribution Style Health Care

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OPEB Liability – Eliminating Retiree Health Care

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OPEB Liability – Funding

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OPEB Liability – No Actions Taken

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Section 6 – Other Actions That Do Not Qualify for EVIP

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Other Actions – Policies/Best Practices

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Other Actions – Policies/Best Practices

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Section 7 – Actions That May Be Taken

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Submitting Your Plan

Each plan submitted to Department of Treasury must include your UAL plan and certification form (found on treasury website) will be due June 1, 2014

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Conclusion

  • Review of your municipality’s funding status

through the Annual Actuarial Valuation

  • Evaluate options for the future
  • Continue to review best practices and implement

fiscally responsible policies

  • Ongoing outreach to stakeholders
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