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Posted on: December 13, 2018

City of East Lansing’s Corrective Action Plan for Pension Obligations Approved by State

EAST LANSING, Mich. — The City of East Lansing’s Corrective Action Plan (CAP), submitted in pursuant to the new Protecting Local Government Retirement and Benefits Act (Public Act 202), was recently approved by the Michigan Department of Treasury.

The plan was submitted by the City of East Lansing following an anticipated notification from the State of Michigan earlier this year in which it was communicated that the City’s pension plan had triggered a preliminary review of underfunded status under the new Act.  

“Pension challenges are not unique to East Lansing; many local municipalities across the state of Michigan continue to struggle due to the ongoing impact of the recession and below-average market returns. When you combine that with the tight restrictions on the ability for Michigan communities to raise new revenue, the challenges for Michigan communities become compounded,” said East Lansing City Manager George Lahanas. “Thankfully, here in East Lansing, our voters recognized the need to address these challenges in order to fulfill our commitments to employees and safeguard our future financial sustainability. With the approval of the new East Lansing income tax, we will be able to begin closing the gap on the unfunded portion of our pension plan in the coming years, while also preserving important City services and providing much-needed reinvestment in public safety and infrastructure.”

The CAP outlines many of the prior actions that have been taken over the years to address the City’s pension challenges. These actions have included:

  • Moving new/current non-public safety employees from defined benefit (DB) plans to defined contribution (DC) plans, beginning in 1999
  • Giving new/current non-public safety employees the opportunity to move to a cost-controlling hybrid plan (a combination DB and DC plan) in 2010
  • Providing lower, cost-controlling DB plans to public safety new hires beginning in 2011
  • Making supplemental pension payments (on top of annual required contributions) to aid in reaching full payment of the plan in a shorter period of time; supplemental payments have included $2 million in Fiscal Year 2016, $1 million in Fiscal Year 2017, $2,560,000 in Fiscal Year 2018 and $1 million so far in Fiscal Year 2019

The City’s CAP also outlines the prospective actions the City plans to take to continue to address the pension plan’s underfunded status. These actions will include:

  • Implementing the voter-approved East Lansing income tax, which is estimated to generate approximately $3 million for supplemental pension payments each year over the next 12 years; with these supplemental payments, the pension plan is expected to be 60% funded by Fiscal Year 2025 according to estimates provided by the Municipal Employees’ Retirement System

Community members and members of the media can view the City of East Lansing’s CAP and other retirement-related state filings here: https://www.cityofeastlansing.com/1826/Retirement-Related-State-Filings.

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