Retire-rehire complicated


MARQUETTE — In February 2010, the Marquette County Board voted 7-1 to immediately rescind the retire-rehire policy after receiving the results of an actuarial analysis that could not estimate or accurately measure unfunded liabilities the county was incurring as a result of the program, according to county documents.

“The impact, if not negative, is ‘unquantifiable,'” said former County Administrator Steve Powers at the time.

According to information provided to the county by the Municipal Employees’ Retirement System of Michigan, along with supplemental information from county Finance Manager Susan Vercoe, the 34 individuals who participated in either the county’s original opt-out program or the modified version that required a 30-day severance period were paid more than $6 million in retirement benefits from MERS during their re-employment through the end of 2016. Two individuals are still employed under the program.

That figure equates to about 18 percent of the county’s current total unfunded liability within the MERS system — which is $34 million short of being 100 percent funded, according to the MERS annual actuarial valuation report dated Dec. 31, 2015.

While the county took steps to curb unfunded liabilities by switching from a Defined Benefit plan to a Defined Contribution plan effective in 2000, County Administrator Scott Erbisch said it will take a while to “catch up.”


“The light is at the end of the tunnel, although it’s temporarily a little further for us to reach right now,” he said.

Around the time the program was rescinded, Powers reportedly projected, based on a 2008 analysis, the county’s defined benefit contributions to MERS would be $1.8 million in 2010, climb to $3 million by 2015 and fall back to $1.7 million by 2020.

In 2016, the county’s payment to MERS far exceeded the amount projected by Powers, at $4,395,684 — which was nearly 17 percent of its $26 million general fund budget.

In 2017, the minimum required payment from the general fund to MERS was expected to increase by about $400,000, said Vercoe, although the county has budgeted for the same amount as paid in 2016. For all county departments, including the medical facility and health department, the payment is could to balloon up to nearly $10 million by 2020, before dropping back down to $5 million the following year.

This problem, however, is not unique to Marquette County.

Municipalities throughout the state are facing a similar financial woes when it comes to legacy costs. Recent changes made by MERS — lowering the assumed annual rate of investment from 8 percent to 7.75 percent and adjusting the mortality table to reflect longer lifetimes — along with the global stock market crash of 2008, have all contributed to increasing unfunded liabilities.

Former Marquette County Undersheriff Jack Schneider, who participated in the county’s “opt-out” program, said these variables have to be taken into consideration when looking at the county’s total unfunded liability. He said he doesn’t believe the opt-out program had a negative impact on the figures outlined above.

“The problem was the pool at MERS and the 2008 stock market crash,” Schneider said. “Everyone started to scramble. … It was nothing we could predict. There are so many things out there, so many variables.”

Schneider argues that regardless whether the program was in place, the same amount of money would have been paid out to retirees had they left employment with the county.

“I don’t understand what the difference is if they continued to work or not,” he said. “If we had all gone and never came back, they’d be paying us that money anyhow.

However, Schneider admitted he would not have “retired” in 2005 at the age of 55 if the opt-out program had not been presented to him.

“My plans weren’t to retire,” said Schneider, who at the time had put in 28 years at the county. “I worked hard to get where I was. (Participating in the program) wasn’t something that I planned on, it was just an extra added benefit that came along.”

While analysts were “unable to definitively determine the effect of the rehire policy on the county’s MERS liability because we cannot determine the extent the policy affected individual retirement decisions,” the 2010 study indicated “the 34 rehired participants studied in this report retired, on average, at ages earlier than the average age at retirement for participants retiring before the rehire policy.”

It also appeared “there is a high likelihood that, on average, the rehired retirees will terminate employment (re-retire) at ages greater than the average age of retirement for the group prior to the rehire policy.”

While not definitive, the study concluded “it is likely that the retirements of the study group increased county liabilities in the MERS Defined Benefit Plan.”

County Board members at the Feb. 16, 2010, meeting criticized the study for being “vague and inconclusive” and agreeing “with both sides.”

Kelsie Thompson can be reached at 906-228-2500, ext. 206. Her email address is