Wayne Co. has plan to help underfunded pension system
Wayne County officials have unveiled a plan to reduce unfunded liabilities in the county’s retirement system.
Wayne County Commission Chairman Gary Woronchak and Commission Fiscal Director Mark Abbo developed a proposal that could put up to $50 million in extra funds into the pension system.
The retirement system is currently only 54 percent funded and has nearly $630 million in unfunded liabilities.
“This proposal would not only contribute to the county’s continuing financial recovery, but would keep faith with the county’s retirees by making the pension fund more secure,” Woronchak said in a statement.
The plan calls for using a portion of the county’s pooled cash reserves to fund additional contributions. Wayne County could also use the additional payment as a credit to reduce the annual required contribution in the future, officials say.
“In addition to the principal amount of the additional contribution, investment of that amount would earn the retirement system’s rate of return, which has been about 9.5 percent over the past five years, instead of at the limited rate earned on the county’s pooled cash funds,” Abbo said in a statement.
“To illustrate, a $50 million additional payment yielding even 7.25 percent instead of the less than 1 percent historically returned by the pooled cash investment, could earn $3,625,000 per year with WCERS (Wayne County Employees Retirement System), versus only $405,000 if left with the pooled cash fund.”
The retirement system’s unfunded liabilities has been a major financial challenge for the county in recent years. Wayne County’s pension funding dropped from 95 percent to 45 percent between 2004 and 2013.
While the pension system’s funding is still below recommended levels, there have been improvements due to strong returns on investments and a “a more disciplined approach by the WCERS board,” Woronchak said.
The Wayne County Commission has also allocated millions of dollars more to the retirement fund than the county’s legally required amount.
Woronchak said there will be further negotiations with Executive Warren Evans before the plan is rolled out.
“There is still a lot of work to be done before this can be implemented, but I believe all parties involved can see that this is worth pursuing,” Woronchak said.