IRON MOUNTAIN — Communities in the Upper Peninsula received $39.25 million of the $533 million in Protecting MI Pension Grant awards handed out this year to stabilize underfunded municipal pension systems.

The state grant program was created in July 2022 in the fiscal year 2022-23 budget bill, which directed the Michigan Department of Treasury to operate a program for qualified retirement systems considered underfunded. Grants were sent out this summer to qualified pension systems with a prefunded ratio below 60%.

In the Upper Peninsula, entities in 13 of the region’s 15 counties received aid. Dickinson County topped the list at $8.3 million, followed by Marquette County, $7.1 million; Ontonagon County, $4.9 million; and Chippewa and Schoolcraft counties, $4.7 million each.

Other totals were Luce County, $2.2 million; Iron County, $1.92 million; Baraga and Gogebic counties, $1.8 million each; Delta County, $900,000; Keweenaw and Mackinac counties, $400,000 each; and Houghton County, $200,000.

There were no recipients in Menominee or Alger counties.

The city of Norway received $3.73 million, which was the most in the U.P., while $3.24 million went to Iron Mountain. Also receiving payments were the Dickinson County Road Commission, $1.28 million; and Dickinson County, $55,783.

Recipients in Iron County were the Iron County Road Commission, $851,132; city of Iron River, $629,183; city of Crystal Falls, $346,242; Bates Township, $70,846; and Gaastra, $23,597.

In a press release, Gov. Gretchen Whitmer said the program will shore up municipal budgets and keep communities from having to divert funds from critical public services. The grants, she added, will help “ensure that Michiganders who served our communities as police officers, firefighters, sanitation workers, and in so many other invaluable professions, will receive the stable, secure retirement that they earned.”

In the same release, Norway City Manager Dan Stoltman agreed the program will buoy the city’s finances. “Helping us get to the 60% funded status makes the light at the end of the tunnel a little closer and a lot brighter for our future,” he said.

Grants in the Upper Peninsula went mostly to Municipal Employees’ Retirement System of Michigan plans, which was the case for all of the payments in Dickinson and Iron counties. The second-highest payment in the U.P. was $3.63 million to the Marquette County Road Commission’s MERS plan.

Before receiving its state payment, Iron Mountain’s MERS plan had an estimated liability of $13.5 million and assets of $4.9 million, making the city eligible for a grant of $3.24 million to bring the prefunded level up from 36% to 60%. Although its MERS plan was classified as underfunded, the city maintains it has paid annually the recommended actuarial amounts.

Reported prefunded levels of other recipients in Dickinson County were: city of Norway, 40.6%; Dickinson County Road Commission, 48.3%; and Dickinson County, 59.9%. Prefunded levels in Iron County included the Iron County Road Commission, 53.7%; city of Iron River, 54.1%; city of Crystal Falls, 56.3%; Bates Township, 36.4%; and Gaastra, 54.7%.

During state budget negotiations in 2022, $250 million in proposed funding to help pension systems prefunded at 60% or higher was taken out, according to the Michigan Municipal League.

Although it did receive a substantial grant, Iron Mountain unsuccessfully sought an additional $8.16 million for a supplemental pension system that appeared to meet the program’s guidelines. The state considers part of the city’s retiree health plan a supplemental pension because retirees can choose to opt out and accept a cash payment. With an obligation standing at $13.6 million, entirely unfunded, Iron Mountain requested $8.16 million to bring the prefunded level up to 60%.

Treasury’s rejection letter stated Iron Mountain’s supplemental plan “does not meet the definition of a qualified retirement system.” Confusion remains, however, because the state since 2021 has classified the city’s supplemental health pension the same as any other pension system defined under the Protecting Local Government Retirement and Benefits Act of 2017.

According to City Manager Jordan Stanchina, the state requires Iron Mountain to strive toward a pre-funded level of at least 60% within 20 years for the supplemental pension, whereas the prefunding requirement for health benefits is 40% within 30 years.

In response to guidelines set by the state, Iron Mountain now contributes at least $239,000 annually to a retiree insurance trust fund. That amount would be about $100,000 lower if the city’s corrective action plan fell entirely under the health benefits classification, Stanchina said.

Elsewere in the U.P., the village of Ontonagon received $1.95 million to go towards MERS obligations it assumed when the community’s hospital was sold to Aspirus in 2007. “I don’t think it ends our problem, but it’s a huge step,” Village Manager Willie DuPont told The Daily Mining Gazette in Houghton. The remaining obligation is estimated between $5 and $6 million.

In Chippewa County, the city of Sault Ste. Marie received $2.64 million to bolster its police and firefighters pension system, which was the largest non-MERS payment in the U.P.

The highest payment statewide was $170 million for the city of Flint’s MERS plan. Flint reported $559 million in pension liabilities but plan assets of just $149 million, or a prefunded level of less than 27%, according to mlive.com.