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CASS COUNTY – Following the completion of contract negotiations, one union leader has spoken out.

Amid changes to retirement plans for some Cass County union employees, Cass County Independent Employees Association President Fern Smith expressed her displeasure with how the county handled negotiations, accusing them of withholding county finances and causing turmoil among employees.

While the CCIEA was able to negotiate for the Cass courts employees she represents to keep their current defined benefit plan, they are the only union not to have been switched over to the new plan – though their contract includes language to potentially switch plans should certain terms be met.

Contracts approved in 2021 have already switched members of the Fraternal Order of Police Labor Council and Command Officers Association of Michigan to the defined contribution plan. The change sparked outcry from members of the public during public comment at county commission meetings, and caused Smith to accuse the county of putting the burden of its debt onto county employees.

“Our union agreement came as a result of making the best of a bad situation,” said Smith, referring to the county’s unfunded liability. “But in a nutshell, what has happened here is that the county has attempted to balance the checkbook on the backs of their employees.”

County Administrator Jeff Carmen, however, disagreed with this claim and attempted to clarify the county’s position.

“Absolutely not true,” said Carmen, of Smith’s claim. “The county contributes more than the employees do. With a shift to a [defined contribution] plan, the county continues with what is called a legacy expense that will go on making the defined contribution benefits safe until the last employee or beneficiary dies. … The defined benefit plan, in the event it’s frozen – and for those employees it’s frozen for – continues to have a substantial cost to the county.”

Smith, who also works for the county as a probation officer, said the CCIEA and the employees it represents understands that costs continue to increase for the county, but said the county did not present specific accounting records.

“You’re dealing with court officials,” Smith said. “Like, we do this every day. You can’t just stroll in the court and say something’s going on. We need proof. That’s our life. You’re over here trying to finagle attorneys. You’re trying to finagle referees. You’re trying to finagle prosecutors. What do you think we do all day? Do you think we just take people’s word for whatever it is? No, you’ve got to have proof.”

County Finance Director Becky Moore denied this claim.

“We’ve been sharing numbers with the union for two to three years now,” Moore said. “Last March, all the employees were invited to a presentation explaining the entire defined benefit pension dilemma. … Even to the extent that we brought representatives from the [Michigan Municipal Employees’ Retirement System] down to explain the situation.”

 

The MERS dilemma

At the crux of the issue is the county’s increasing unfunded liability with MERS. From 2006 to 2020, the county’s unfunded liability increased from $2.3 million to $12.5 million, according to the 2020 MERS actuarial report.

Carmen said despite implementing a state-authorized formula two years ago designed to eliminate the unfunded liability in 20 years, the county’s debt continues to increase. This resulted in the decision to negotiate for the change from a defined contribution to a defined benefit retirement plan.

He also emphasized that the county has made all of its required payments to the program since it joined in 1993.

“The county has contributed everything it should,” Carmen said. “We have said this in at least 40 meetings, and it is a fact that the county has contributed everything it was told to contribute. We have never short-changed our obligation to MERS.”

So, why does the county’s unfunded liability continue to increase? Moore said she believes it is because MERS’ actuarial studies may not be accurate.

“If they were accurate, they’d be correcting,” Moore said. “In other words, if their interest wasn’t making what it should be, or people were living longer or retiring earlier, those corrections should have been made. … and it’s not just Cass County who has this problem.”

According to MERS documents, just 53 of 742 Michigan municipalities are funded at 100 percent or more, while 499 are 80 percent or less funded. This means more than 93 percent of municipalities have unfunded liability. According to the most recent Michigan Department of Treasury data, neighboring Berrien County has more than $81 million in unfunded pension liability, while Van Buren County has more than $14 million.

“What other conclusion can you come up with, other than MERS’ reports are inaccurate?” Moore said. “They do not admit there is a problem. But there’s got to be a problem because if there wasn’t a problem, out studies wouldn’t keep producing a larger loss.”

MERS did not respond to a request for comment.

 

Employees

Whatever the reason for the retirement plan changing, Smith maintains that the decision affects the employees most.

“Unfortunately, the county morale is damaged so bad,” she said. “I’ve heard from folks who have been here for 20 years, and they said they’ve never seen anything like this. It has caused people to retire early because they’re scared. They don’t know what’s going to happen and they don’t want to be there when the ball drops. It’s just been so sad because it’s forcing people to make decisions early.”

According to Carmen, the decision to change retirement plans was a necessary one.

“The most cost-saving option was to close the pension and just begin something else,” he said. “That would have saved us millions of dollars, but our evaluation was that it was too much of a burden to place on our employees. … Our employees are our greatest resource.”

One point Carmen emphasized multiple times was that the county is neither taking away pensions from its employees, nor skipping out on promised benefits to employees whose plan has changed.

“I want to be absolutely clear,” Carmen said. “We are not gutting employee benefits.”