NEGAUNEE — The city of Negaunee will submit a corrective action plan for its employee retirement account to the state by the due date in June.

The Negaunee City Council unanimously approved a corrective action plan for its Municipal Employees Retirement System plan during its meeting on Thursday. The plan will be submitted to the Michigan Department of Treasury.

The city was notified in 2019 by the Michigan Department of Treasury that its $12.5 million pension liability is 49% funded and is considered “underfunded” by the state.

Under Public Act 202 of 2017, a municipally held employee pension system that is less than 60% funded and requires an annual contribution that constitutes more than 10% of the municipality’s general fund operating revenue falls into an “underfunded status.”

According to an agenda supplement, the city’s required contribution was $486,713 in 2019, as compared to its annual government fund revenues of $5.6 million.

The city requested a waiver, which was denied, from the department of treasury in September, asserting that a portion of its retirement liabilities should be attributed to its water, sewer and electric funds.

Under the plan approved Thursday, the city will propose using payment in lieu of taxes from its electric fund not to exceed 7% of its annual operating revenue, which would be transferred to the general fund, and a surplus transferred from its police pension, which would be added to its current MERS contribution to pay down the city’s pension liability over the next 20 years.

The transfer of funds from the police pension and the electric fund would be subject to council approval with the city’s annual budget, Negaunee City Manager Nate Heffron told the council.

Lisa Bowers can be reached at lbowers@miningjournal.net.