Strong returns at Michigan's municipal pension system ease long-term strain on workers and taxpayers

Strong investment performance in 2025 increases the likelihood that underfunded municipal pension systems in Michigan will close funding gaps and reduce long-term liabilities for taxpayers. The Municipal Employees’ Retirement System of Michigan (MERS) posted returns that outperformed its benchmark and placed it in the top 15% of peer funds, exceeding its target rate of return across all measured time periods. MERS manages more than $19 billion in assets and serves over 150,000 participants, including police officers, firefighters, nurses, and other municipal workers across the state. As the fiduciary for participating local governments, MERS oversees investments, monitors performance, and manages costs for local pension plans—administering retirement systems for about 84% of Michigan’s municipalities. This performance comes amid ongoing funding challenges: in 2023, Michigan lawmakers approved up to $750 million in taxpayer funds to support pension systems funded at 60% or less. At that time, 37 of 748 municipalities fell below that threshold. Saginaw’s system, for example, was funded at just 49.1% in 2021, carrying a net pension liability of $180.1 million. Years of insufficient contributions, despite constitutional requirements to pre-fund pensions, left many systems strained, turning retirees and workers into de facto creditors of their governments. In MERS’s 2024 report, only 96 municipalities had pensions funded above 100%. Strong investment performance in 2025 increases the likelihood that underfunded systems will close funding gaps and reduce long-term liabilities for taxpayers.