Sunday, December 3, 2017

Underfunded post-retirement promises

Data from
I thought it would be interesting to see how some local, Michigan communities compared for underfunded, post-retirement promises.

I was surprised to find that Eaton Rapids is the outlier in a negative way.  The City of Eaton Rapids' obligations to her current and future retirees adds up to over $3000 for every man, woman and child within city limits.  That compares to roughly $1350 for Charlotte and $70 for Potterville.

On a per-household basis, it amounts to an obligation of $12,000 per household in a community where the median annual income is $40,000 per household.

The biggest portion of the shortfall is due to benefits after retirement and not actual pensions.  According to the notes at

"The City provides retiree healthcare benefits to eligible employees and their beneficiaries. This is a single employer defined benefit plan administered by the City. The benefits are provided under collective bargaining agreements and council-adopted policy."
If I read this note correctly then this shortfall can be reduced by changes in the "collective bargaining agreements" and by changes in "council-adopted policy".  That is, those "obligations" can be removed with the stroke of a pen.

It is worth noting that only active employees vote on accepting or rejecting collective bargaining agreements.  At some point funding benefits for retirees will cannibalize a significant chunk of the funding available to pay for current employee's wages and benefits.  My guess is that current employees will vote to reduce retiree benefits so they can enjoy a living wage.


  1. My folks ran into exactly that problem when Dad retired from General Electric. Healthcare was a "guaranteed benefit"...until the contract came up for re-negotiation. Although lots of retirees went and protested loudly, the current workers voted the healthcare benefit out for retirees. The thought was they are retired so they qualify for Medicare. My folks wound up buying a good supplement to their Medicare. They were lucky in that they had always saved for retirement, and had the resources to pay for it without difficulty.
    Thanks for the link. I want to see what the story is in my part of MI.

  2. Guess we are either going to move to Kalamazoo county or going to anticipate paying lots more in a few years. Lest we are on the western side of the state. The counties on the east side look like they could be in a world of hurt!

  3. Yep, that is exactly what is going to happen... People will line 'their' pockets at the expense of the elderly, who are counting on those dollars as they age out.


Readers who are willing to comment make this a better blog. Civil dialog is a valuable thing.