March 8, 2001

To: Michigan Township Association, Michigan Municipal League, Michigan Association of Counties, County Boards of Commissions, Cities, Villages, Townships, Authorities, and Other Municipal Agencies

From: Richard L. Baldermann, Administrator Local Audit and Finance Division

RE: Reporting of Pension Obligations as recommended by the Michigan Commission on Public Pension and Retiree Health Benefits

In November 1999, Governor Engler signed Executive Order Number 1999-13 establishing a nine member commission to review public pensions and retiree health benefits in the State of Michigan. The Commission was charged with the responsibility to look at the state laws that govern or affect the funding, management, oversight and fiscal integrity of public pension and retirement systems. Also the Commission had the responsibility of reviewing the adequacy of funding for public pension and retirement systems and the extent of unfunded accrued liabilities. The Commission was to consider, recommend, and report such modifications in state laws governing or effecting public pension and retirement systems as the Commission thinks appropriate in the circumstances.

As a result of this process, one of the recommendations from the Commission centers on improving public awareness of retirement system issues through public disclosure of certain information regarding the financial status of their retirement plan. It was found that retirement systems remain a mystery to most taxpayers, many elected officials, and even employees who are affected by them. The Commission felt that there is an overall lack of easy to find and easy to understand information for participants, policymakers, and voters to make good decisions. They recommended that the State develop a statewide report card on governmental retirement plans.

As a result, each local unit of government that provides a retirement plan to workers will be required to provide the Michigan Department of Treasury with certain information relating to the financial status of their retirement plan. Treasury will consolidate the information and publish both detail and summary information that will be available to all in print and on the Internet. The report card will allow interested workers, policymakers, and voters to easily understand the financial security being provided by their units compared to similar units and whether their local governments are meeting the funding requirements needed to provide those benefits. The information will be required to be placed on a F-65 report of locally administered pension funds (a form to be developed by Treasury Department in the near future based on recommendations of the Commission). Failure to provide the information to Treasury will subject state shared revenue to be withheld for non-compliance.