Michigan governor eyes lower assumed investment rate for pensions

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By Karen Pierog

<span class="articleLocation”>Michigan Governor Rick Snyder on Wednesday
unveiled a plan to drop the assumed rate of investment return
for the state’s retirement funds to 7.5 percent from the
current 8 percent.

The Republican governor said the change would be significant
but prudent.

“We want to be conservative in making sure we have those
resources for the people that earned those pensions and
benefits,” Snyder told a joint House and Senate appropriations
committee as part of his fiscal 2018 budget presentation.

He added that further reductions in the rate were possible
if merited. Under the plan, the reduced rate for funds covering
state workers, police, judges, and the national guard, would be
immediate upon adoption by the state budget director and the
retirement systems’ boards. A lower rate for the Michigan Public
School Employees’ Retirement System would be phased in over two
years.

The move would trigger increased pension payments by
Michigan of an additional nearly $247 million in fiscal 2018,
which begins Oct. 1, and $400 million in fiscal 2019, according
to budget documents.

Snyder proposed a $56.3 billion all-funds budget, which
includes $10.1 billion for operations and $12.3 billion for
primary and secondary public schools.

On Monday, he announced a task force to formulate proposals
by this spring for Michigan’s local government pensions and
retiree healthcare. The total unfunded liability for healthcare
is about $10 billion and the total unfunded pension liability is
estimated at $4 billion for hundreds of local governments units
that offer these benefits, according to Snyder’s office.



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