ROGERS CITY — The Rogers City City Council on Tuesday agreed to let City Manager Joe Hefele work toward an agreement with a local businesswoman who has expressed interest in administering the city’s defined contribution retirement plan for employees hired after July 1.

Council members decided it would consider working with Vicki Filipiak of Foresters Financial Services to administer the retirement plan instead of using the Municipal Employees’ Retirement System of Michigan, which manages the pension plan for city’s current and retired employees.

While pension plans pay out guaranteed benefits, defined contribution plans have set contributions from employees and employers but ultimate benefits are not guaranteed. The city in March made the change to a defined contribution plan for future hires after costs for its pension plan boomed.

The change “will only affect full-time employees hired into full-time work hired after July 1,” Hefele said. “It won’t mean anything to any full-time employee that’s hired and is working for the city prior to July 1, 2019.”

The council’s decision is another step in the ongoing process of selling bonds that officials hope will stabilize the payments it owes to MERS from its unfunded pension liabilities.

The city’s pension obligations to current and future retirees are only about 50% funded, which means that, if all retirement benefits were claimed today, about half of the retirees would receive what they are owed.

City officials hope to sell up to $7 million in bonds to raise money to cover that debt because bonds can be repaid at a more manageable rate over several years.

Hefele said the city only received one letter of interest — from Filipiak — after advertising a need for a plan manager and reaching out to local financial firms via email. While the main office for Foresters Financial Services is based out of Farmington Hills, Hefele said Filipiak has a residence in the city and is a taxpayer.

Hefele said Filipiak already manages some 457 plans for city employees who have that type of retirement plan. A 457 plan is a deferred-compensation retirement plan, which means there is no tax assessment or penalty should an early withdrawal occur.

Hefele said full-time employees hired after July 1 will receive a 401A plan, which is similar to a 401K plan offered in the private sector. He said the 401A plan stipulates that, when an employee contributes 5% of his or her gross pay, the city will provide the employee with a 5% match.

The city council will have time to review the plan and will take action on the proposed agreement with Filipiak at a later date.

MERS manages retirement plans for most local governments in the state.

Crystal Nelson can be reached at 989-358-5687 or cnelson@thealpenanews.com.