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 Cost (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 through 2008. Subsequent fiscal years reflect the effect of the market downturn on the City's pension obligation in relation to the system's assets.
The City's Pension is currently 86% funded while OPEB is 66% funded. Combined, the City's liability for these two items are 80% funded as of 2018.