Treasury Recommendation Suburban Mobility Authority for Regional Transportation

OPEB Corrective Action Plan (CAP) Non-Primary Unit 827550

Name of Systems

Type of System

Assets Liabilities Funded Ratio

ADC Revenues ADC/Revenue CAP required?

MERS Pension $168,162,179 $243,159,671 69.2% $5,725,357 $160,476,853 3.6% No Healthcare OPEB $39,990,911 $195,802,936 20.4% $13,048,354 8.1% Yes Total $208,153,090 $438,962,607 $18,773,711 160,476,853 11.7%

Source: Retirement Report 2017, Audited Financial Statements

Staff Recommendation: Approval of the OPEB corrective action plan submitted by Suburban Mobility Authority for Regional Transportation (SMART), which was received by the Municipal Stability Board (the Board) on October 17, 2018. If approved by the Board, Treasury and the Board will continue to monitor them for compliance per Public Act 202 of 2017 and implementation of their corrective action plan. Changes Made:

• Modern Plan Design: o SMART made the claim that it implements various retiree monthly insurance premium

cost sharing arrangements; however, we were not able to confirm these arrangements based on the information submitted in the corrective action plan.

o We confirmed through SMART’s audited financial statements that during FY 2015, SMART implemented a defined contribution Health Care Savings Plan, effectively closing the defined benefit plan to new employees.

• Plan Funding: o SMART created a qualified trust for retirement health care on 6/24/2007. As of June

30th, 2018, the MERS investment statement shows plan assets of $54.1 million. o The SMART board has committed $4.1 million over and above the Authority’s pay-as-

you go amount for fiscal year 2018/19.

• Other Considerations: o None Listed

Prospective Changes:

• Modern Plan Design: o None Listed.

• Plan Funding: o The minimum funding commitment of the SMART board of $4.1 million will be reviewed

annually by the Authority’s budget committee to determine if a larger financial commitment is required or if affordability of the commitment becomes an issue for the Authority’s annual operating budget.

• Other Considerations: o None Noted.

Treasury Recommendation Suburban Mobility Authority for Regional Transportation

OPEB Corrective Action Plan (CAP) Non-Primary Unit 827550

Plan size: 1,164 members

• Inactive employees or beneficiaries currently receiving benefits: 743 • Active employees: 421

Corrective Action Plan Criteria:

The following corrective action plan approval criteria are met:

• Underfunded Status: o The corrective action plan demonstrates it will reach the PA 202 established funding

level of 40% funded as demonstrated by the actuarial projection found in the corrective action plan.

• Reasonable Timeframe: o The corrective action plan demonstrates the local unit reaches the PA 202 established

funding level of 40% within a reasonable timeframe (2022). • Legal and Feasible:

o The local unit’s corrective action plan appears to follow all applicable laws. The actions listed appear reasonable and the corrective action plan has been approved by the governing body.

• Affordable: o The local unit confirms 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.

Supplemental Information:

• SMART provided the following actuarial projection demonstrating the plan projects to be 40% funded by FY 2022. The projection below assumes a $4.1 million contribution above the pay-as-you go amount. As a result, this funding arrangement is expected to exceed the actuarially computed employer contribution each year. Also of note, the projection below assumes an investment rate of return of 5.50%.

Treasury Recommendation Suburban Mobility Authority for Regional Transportation

OPEB Corrective Action Plan (CAP) Non-Primary Unit 827550

The Community Engagement and Finance Division (CEFD) contact:

• None noted.