CATA's retiree health care system is underfunded

CATA's retiree health care system is underfunded

April 27, 2019

In an April 14 story, I talked about fringe benefits - including pensions - for employees of the Capital Area Transportation Authority (CATA). Somebody asked about the funding status of the pension systems.

First, the good news.

Funding for the two pension programs is good. The ATU Retirement Plan - for Amalgamated Transportation Union members - is overfunded, at 103.3%. The plan for administrative employees is 89.0% funded. No corrective action is required by the state unless funding is under 60%.

Funding for the retiree health care plan is not so good.

Public Act 202 of 2017 requires all local units of government that have a retirement pension system or retirement health care system to submit reports to Treasury's Municipal Stability Board no later than six months after the end of its fiscal year. Here is CATA's pension report.

Note: To find the data for any local entity, go to this page on Treasury's website. Toward the bottom, you will see "Retirement System Reporting Data", and under that, "Local Retirement System Status Report" followed by the two most recent fiscal years. Click on the desired year. The report downloads to your computer. It is an Excel file listing local government units by county. At the bottom of the screen are three tabs: Local Unit Summary, Pension System Summary and Health Care Summary. The detail is in the second and third tabs. The data comes from the Forms 5572, Retirement System Annual Report submitted by local units. These reports are supposed to be available on the local units' websites.

While a corrective action plan must be submitted if a pension plan is less than 60% funded, none is required for a retiree health care plan unless it is under 40% funded. CATA's is 16.0% funded.

CATA submitted its corrective action plan in January in a 3-page "CATA Memorandum" attached to a larger document. In it, CATA says its retiree health plan has liabilities of $50,950,992 and assets of $8,115,213 for a unfunded liability of $42,795,779. Here's CATA's plan:

The plan did not satisfy the Municipal Stability Board. In its March 1 disapproval letter, it gave these reasons:

The corrective action plan failed to demonstrate the retirement system will reach 40% funded.
The corrective action plan does not demonstrate when the retirement system will reach 40% funded.
The local unit did not confirm in section 5 of the corrective action plan template that the corrective actions listed will allow for the local unit to make, at a minimum, the retiree premium payment, as well as the normal cost payment for all new hires (if applicable) according to the long-term budget forecast.

CATA is to submit a revised corrective action plan within 60 days.

Along with the reports on pension plans, Treasury requires local government units to submit their most recent audited financial statement. Here is CATA's.

Here are the funding percentages for the City of Lansing's retirement systems:

Pension

Retiree Health Care

Police & Firefighters Retirement System
68.4%

8.6%

Employees Retirement System
64.4%

24.3%

And here are links to other local government information on Treasury's website:

Send comments, questions, and tips to stevenrharry@gmail.com, or call or text me at 517-505-2696. If you'd like to be notified by email when I post a new story, let me know.

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