The City pension charge is a required expenditure for any government that has a defined benefit pension plan for its employees. The defined benefit pension plan at the City of Ann Arbor has both the employee and employer pay a portion of the costs. The amount of the employer’s share is determined annually by an actuarial valuation. The employee’s share is set by City ordinance. In January of 2017, a hybrid pension plan took effect for non-Police and Fire employees. For budget purposes, the City uses a percentage from the actuary report and applies it to wages to determine each service unit’s share of the total Actuarially Determined Contribution (ADC). The entire ADC is what the City is required to fund each year and remit to the Pension Trust fund.
The City's Retirement System was fully funded in 2021. Subsequent fiscal years reflect the effects of the market on the City’s pension obligations. In fiscal year 2015, the City adopted the provisions of GASB 68 switching from actuarially values to total net pension liability. In the State of Michigan, retirement systems are required to maintain a minimum funding level of 60% or higher. The City has consistently been above 80% funded since 2006 and maintains a goal of reaching 100% funding in the Retirement System.
