City of Lansing Retirement Systems

Updated July 12, 2017

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Overview

 

The City has two separate retirement systems, the Police and Fire Retirement System (P&F) and the Employees Retirement System (ERS). Membership in the Police and Fire Retirement System is restricted to Fire Department employees who hold the rank of firefighter or higher and Police Department employees who hold the rank of patrolman or higher.

 

The Employees Retirement System includes these groups: Teamsters, Exempt, District Court, Executive Pay Plan, Police 911, and UAW. Elected officials are excluded - they have only a defined contribution plan.

 

Benefit provisions are spelled out in the City ordinances, but those provisions often change when new union contracts are negotiated and months may pass before the ordinances get updated. Actuarial valuations always include a section called "Summary of Plan Benefits," and that section in the latest actuarial valuation may contain the clearest and most up-to-date description of benefits available. Links to the actuarial valuations are below.

 

Unlike other City retirees, retired police and firefighters don't pay state taxes on their pensions (starting with tax year 2013). Senate Bill 409 (analysis), passed in December 2012, exempts pubic pensions from the state income tax if the employing agency does not participate in the social security system. Lansing's police and firefighters do not contribute to or receive benefits from the social security system.

 

The Police and Fire Retirement System board consists of eight trustees: the mayor; a member of the city council selected by the council; the city treasurer; a resident of the city, appointed by the mayor; two members of the Police Department, elected by the members of the Police Department; and two members of the Fire Department, elected by the members of the Fire Department.

 

The Employees Retirement System board consists of nine trustees: the mayor; a member of the city council selected by the council; the city treasurer; the human resources director; three members of the retirement system elected by the members of the system, not more than one from the same department; and two Michigan residents, appointed by the mayor, one a retiree of the system and the other not a member of the system.

 

The Retirement Office website provides names of retirement board members, meeting schedules, budgets and financial reports.

 

Operating expenses

 

The figures below come from budget reports on the Retirement Office website.

 

P&F

 

ERS

 

2015

2016

 

2015

2016

Investment fees

$984,086

$706,216.52

 

$491,333

$420,229.30

Investment advisor (ACG)

69,656

52,553.0

 

69,656

52,553.27

Actuary

11,962

24,270.52

 

69,656

52,553.27

Medical director (evaluations)

2,016

4,950.00

 

916

1,100.00

Trustee training and education:

         

   In-state conferences/seminars

6,908

8,870.30

 

7,450

6,464.00

   Out-state conferences/seminars/due diligence trips

18,558

19,596.28

 

23,504

15,795.04

Memberships

3,930

748.00

 

3,930

747.50

Tegrit (software)

196,226

12,000.00

 

196,226

12,000.00

Data clerk  

6,807.00

     

Dewpoint, Inc.

1,361

   

1,361

 

Contract services

       

6,807.00

Death audit services

338

337.50

 

338

337.50

Other (computer equipment)

1,285

       

Total:     

$1,296,326

$836,349.12

 

$810,502

$542,852.49

 

Retirements since 2010

Police and Fire Retirement System

Employees Retirement System

Board meeting minutes

Police and Fire Retirement System

Employees Retirement System

Joint Meetings

Actuarial valuations

 

Actuarial valuation reports for pensions are issued at the end of the year and are based on information from the previous year. They are published on the Retirement Office website. Actuarial valuations for retiree health care, on the other hand, are done every 2 years, and since retiree health care is not the responsibility of the retirement boards, the valuations are not on the Retirement Office website or anywhere else on the City's website. They can only be obtained through FOIA.

 

    Pensions:

Police and Fire: 2009, 2010, 2011, 2012, 2013, 2014, 2015

Employees Retirement System: 2009, 2010, 2011, 2012, 2013, 2014, 2015

    Retiree health care (OPEB):

Police and Fire: 2011, 2013, 2016

Employees Retirement System: 2011, 2013, 2016

Pension funding history

 

Pensions are funded from 3 sources: earnings on investments, member contributions and payments from the City. The amounts the City is required to pay are determined by the actuarial valuations. Payments are made at the end of the year, after the actuarial valuations come out.

 

The source of the following is a section in the actuarial valuation called "Historical Funding Progress."

 

Police & Fire Retirement System (P&F)

As of

December 31:

Actuarial Value

of Assets

Actuarial

Accrued Liability

Percentage

Funded

Unfunded Actuarial

Accrued Liability

2001 280,518,000 249,204,000 112.6% (31,314,000)

2002

280,686,000

259,282,000

108.3%

(21,404,000)

2003

277,947,000

267,786,000

103.8%

(10,161,000)

2004

275,807,000

279,873,000

98.6%

4,066,000

2005

275,216,000

290,299,000

94.8%

15,083,000

2006

278,839,000

308,193,000

90.5%

29,354,000

2007

293,571,000

315,635,000

93.0%

22,064,000

2008

287,394,000

326,673,000

88.0%

39,279,000

2009

280,342,000

337,315,000

83.1%

56,973,000

2010

276,377,041

359,293,016

76.9%

82,915,975

2011

264,492,738

372,547,509

71.0%

108,054,771

2012

257,898,061

373,083,911

69.1%

115,185,850

2013

277,267,947

383,879,280

72.2%

106,611,332

2014

288,785,965

395,089,321

73.1%

106,303,356

2015

292,531,481

410,189,555

71.3%

117,658,075

 

Employees Retirement System (ERS)

As of

December 31:

Actuarial Value

of Assets

Actuarial

Accrued Liability

Percentage

Funded

Unfunded Actuarial

Accrued Liability

2001 191,311,000 213,648,000 89.5% 22,337,000

2002

192,920,000 215,405,000 89.6% 22,484,000

2003

199,329,000 221,088,000 90.2% 21,759,000

2004

206,200,000 231,389,000 89.1% 25,189,000

2005

207,881,000 241,882,000 85.9% 34,001,000

2006

208,765,000 251,427,000 83.0% 42,662,000

2007

208,572,000 254,356,000 82.0% 45,784,000

2008

200,600,000 258,331,000 77.7% 57,731,000

2009

193,324,000 262,298,000 73.7% 68,974,000

2010

187,440,590 269,461,935 69.6% 82,021,345

2011

177,100,863 287,306,707 61.6% 110,205,844

2012

167,569,807 293,974,433 57.0% 126,404,626

2013

172,687,582 313,258,746 55.1% 140,571,164

2014

177,259,421 309,924,744 57.2% 132,665,323
2015 176,031,902 308,794,993 57.0% 132,763,091

 

P&F and ERS Combined

As of

December 31:

Actuarial Value

of Assets

Actuarial

Accrued Liability

Percentage

Funded

Unfunded Actuarial

Accrued Liability

2001 471,829,000 462,852,000 101.9% -8,977,000

2002

473,606,000 474,687,000 99.8% 1,080,000

2003

477,276,000 488,874,000 97.6% 11,598,000

2004

482,007,000 511,262,000 94.3% 29,255,000

2005

483,097,000 532,181,000 90.8% 49,084,000

2006

487,604,000 559,620,000 87.1% 72,016,000

2007

502,143,000 569,991,000 88.1% 67,848,000

2008

487,994,000 585,004,000 83.4% 97,010,000

2009

473,666,000 599,613,000 79.0% 125,947,000

2010

463,817,631 628,754,951 73.8% 164,937,320

2011

441,593,601 659,854,216 66.9% 218,260,615

2012

425,467,868 667,058,344 63.8% 241,590,476

2013

449,955,529 697,138,026 64.5% 247,182,496

2014

466,045,386 705,014,065 66.1% 238,968,679
2015 468,563,383 718,984,548 65.2% 250,421,166

 

City contributions to retirement funds

 

The amount the City is required to contribute to the retirement funds is determined in the actuarial valuations. Payments are made around the end of the calendar year, soon after the actuarial valuations come out. So, for example, the required contribution for fiscal year 2016, which ends June 30, 2016, is determined in the 2015 actuarial report, which is based on information supplied by the City at the end of 2014.

The calculation of the "Actuarial Determined Employer Contribution" is pretty complicated for regular folk. One part of it is the "Normal Cost," which is the amount that must be set aside for the pension benefits earned in the current year. The other is the "Amortization of Unfunded Accrued Liability," which is this year's payment on the funding shortfall accumulated over the years. The amortization period is 30 years. In the example below, which is from page 12 of the 2014 P&F valuation, a "City Normal Cost Rate" of 15.5% is calculated along with an "Amortization Rate" of 24.7%. The sum of those two rates - 40.2% - is then multiplied by the "Projected Fiscal Payroll" to get the "Total City Contribution."

 

 

Here are the figures for Police & Fire for the last 6 years. The normal cost rate, UAAL amortization rate and projected fiscal payroll come from the individual valuation reports. The amounts are my (Excel) calculations:

Police & Fire City Contribution Calculation

Valuation

Year

Normal

Cost Rate

UAAL

Amortization

Rate

Projected

Fiscal

Payroll

Normal Cost

Amount

Amortization

Amount

City

Contribution

for P&F

2009

15.47%

10.22%

30,442,645

4,709,477

3,111,238

7,820,716

2010

15.15%

15.88%

29,780,315

4,511,718

4,729,114

9,240,832

2011

14.27%

24.83%

25,918,180

3,698,524

6,435,484

10,134,008

2012

15.7%

25.90%

26,983,418

4,236,397

6,988,705

11,225,102

2013

16.9%

24.90%

26,405,725

4,462,568

6,575,026

11,037,593

2014

15.5%

24.70%

27,078,405

4,197,153

6,688,366

10,885,519

2015

14.2%

27.1%

27,876,798

3,958,505

7,554,612

11,521,768

 

Here are the figures for ERS:

ERS City Contribution Calculation

Valuation

Year

Normal

Cost Rate

UAAL

Amortization

Rate

Projected

Fiscal

Payroll

Normal Cost

Amount

Amortization

Amount

City

Contribution

for ERS

2009

10.32%

12.31%

30,601,855

3,158,111

3,767,088

6,925,200

2010

10.01%

11.98%

31,547,766

3,157,931

3,779,422

6,937,354

2011

7.50%

24.45%

26,874,899

2,015,617

6,570,913

8,586,530

2012

7.10%

32.60%

23,592,272

1,675,051

7,691,081

9,366,132

2013

8.60%

40.40%

21,521,242

1,850,827

8,694,582

10,545,409

2014

7.90%

36.20%

23,085,894

1,823,786

8,357,094

10,180,879

2015

7.20%

35.70%

23,924,600

1,722,571

8,541,082

10,246,872

 

And here, finally, are the totals for P&F and ERS combined, showing the two components of the city contribution: the normal cost and the amortization of UAAL:

P&F and ERS Combined

Valuation Year/Fiscal Year

Normal Cost

Amortization

of UAAL

Total City

Contribution

2009/2011

7,867,589

6,878,327

14,745,915

2010/2012

7,669,649

8,508,536

16,178,185

2011/2013

5,714,142

13,006,397

18,720,539

2012/2014

5,911,448

14,679,786

20,591,234

2013/2015

6,313,394

15,269,607

21,583,002

2014/2016

6,020,938

15,045,460

21,066,398

2015/2017

5,681,076

16,095,694

21,768,640

 

Retiree health care

 

In addition to employee pensions, the City has to pay for "other post employment benefits" (OPEB) - primarily, retiree health care - and these costs are outside the responsibility of the retirement boards. They are not addressed in the same actuarial valuation reports mentioned above -  the ones that calculate actuarial pension liability and required payments by the City. The latest retiree health care actuarial valuation reports were issued in June 2017 and based on information provided by the City as of January 1, 2016.

 

This is from page 5 of the Police & Fire report, under Actuarially Determined Contribution, Fully Pre-Funded Basis:

 

 

This is from page 5 of the ERS report, under Actuarially Determined Contribution, Fully Pre-Funded Basis:

 

 

The "actuarially determined contribution" for P&F is $15,487,904 and for ERS it is $10,582,235 for a total retiree health care contribution of $26,070,139. Add that to the $21,768,640 combined total contribution for pensions and we have $47,838,779.

 

UAAL for retiree health care is $195.3 million for P&F and $141.7 million for ERS, for a total of $337.0 million. Add that to the $250.4 million unfunded pension liability and we have $587.4 million. With 49,505 households in Lansing, $587.4 million comes to $11,865 per household. My figures are more current, but in line with those in a February 2015 presentation by the City's actuary which may be found in this document.