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By The Daily Press
IRON MOUNTAIN -- Grant awards totaling $11.4 million could be on the way to shore up Iron Mountain's pension system.
The city council Monday adopted a resolution that will accompany its application to the Protecting MI Pension Grant Program, which was established under a state budget bill passed last July. Local units of government that qualify for the aid can expect to learn their final grant amounts July 17, according to the Michigan Department of Treasury.
Heather Lieburn, the city's chief financial officer, is gathering documentation needed for the application, City Manager Jordan Stanchina said. The council's resolution authorizes Stanchina, as chief administrative officer, to file the claim.
Under the fiscal year 2022-23 budget, the treasury department was appropriated $750 million to establish and operate a grant program for qualified pension systems with a funded ratio below 60%.
Iron Mountain's situation is somewhat unique, since a portion of its retiree health plan is considered a supplemental pension. Although the city began phasing out retiree health benefits for new employees in 2009, it has outstanding plan liabilities in the range of $40 million.
In 2021, a portion of the health plan was reclassified by the state because retirees can choose to opt out and accept a cash payment. That's considered a supplemental pension, which qualifies for the grant program, while the health plan does not.
Iron Mountain is reporting a supplemental pension obligation of $13.6 million, entirely unfunded. The city, then, appears eligible for an $8.16 million grant to bring the pre-funded level up to 60%.
Also eligible for aid is the city's Municipal Employees' Retirement System of Michigan plan, which has an estimated liability of $13.5 million and assets of $4.9 million. In this case, the city is eligible for a grant of $3.34 million, which would bring the pre-funded level up from 36% to 60%.
The MERS plan is considered underfunded even though the city has always paid the recommended actuarial amounts. The shortfall, according to Stanchina, is partly due to having fewer active employees than in the past, leaving a smaller pool to pay into the system.
Retiree health benefits, meanwhile, have been funded mostly on a pay-as-you-go basis. The city only in recent years has established a Retiree Health Insurance Trust Fund to meet the requirements of the state's Protecting Local Government Retirement and Benefits Act of 2017. Any grant to cushion the supplemental pension would go into a MERS fund to pay future benefits, so there won't be much immediate effect on the city's budget.
Based on Treasury's preliminary review, other entities in Dickinson County that could see relief are the Dickinson County Road Commission, whose MERS pension system is pre-funded at 48.3%; and the city of Norway, whose MERS plan is pre-funded at 40.6%.
Dickinson County's MERS system is pre-funded at 59.9%, and Controller Brian Bousley has said he'll look into whether it's worthwhile to file a claim.
In Iron County, MERS plans reported as eligible for aid include Bates Township, currently 36.4% funded; city of Caspian, 57.8% funded; city of Crystal Falls, 56.3% funded; city of Gaastra, 54.7% funded; Iron County Road Commission, 53.7% funded; and city of Iron River, 54.1% funded.
The deadline for qualified units to apply for aid is June 15.