News & Insights
New Grant Program Available for Underfunded Local Government Pension Plans in Michigan
March 7th, 2023
By Rod Taylor |
Financial & Retirement Planning
A new grant program has been created to help underfunded pension systems of local governments required to report under the Protecting Local Government Retirement and Benefits Act (PA 202 of 2017). The State of Michigan has appropriated $750 million for the Protecting MI Pension Grant Program, targeted to local units with a fund ratio of less than 60%. An estimated 140 local units across the State may qualify for this program.
The impact of growing pension payments has drastically impacted local units of government’s ability to provide critical services. The Protecting MI Pension Grant Program aims to significantly improve the financial stability of many local units around the State, providing an overall benefit to all local units.
The official grant is slated to open on Saturday, April 15, and close on Thursday, June 15. The Treasury Department will host a webinar in March or April to share information about this grant opportunity with interested units.
To determine if your local unit is eligible, the State has provided a listing of the preliminary qualified retirement systems.
Here are some key highlights:
- The date used to determine eligibility is based upon the last Retirement Summary Report (form 5572) filed with the State as of December 31, 2021.
- The grant is capped at $170 million, or the amount needed to bring the local unit to 60%.
- If the grant is accepted, a government unit must agree to specific requirements, including:
- Not providing benefit enhancements unless they are prefunded.
- The assumed rate of return must be 7% or lower.
- The unit will be monitored for five years by the Municipal Stability Board.
For complete information on this grant program, review the specific language (located on page 121) of the State’s 2023 budget and the Protecting Mi Pension Grant Program webpage on the Michigan Department of Treasury website.
Eligible local units will need to closely evaluate the benefits and challenges posed by accepting these funds.
Maner Costerisan is here to assist local units in evaluating the short and long-term benefits to your community and employees.