Grand Traverse County Administrator Tom Menzel wants to resolve a “major decision” this year long discussed by county commissioners: whether to leave the county’s pension plan provider.

Menzel plans to approach commissioners this summer with a proposal to establish a county pension board – a group consisting of county finance and administrative staff, employee representatives and financial professionals from the community. The board’s long-term purpose would be to monitor and provide quarterly updates on the county’s pension plan, ensuring both employees and commissioners have “consistent, transparent” updates on its status.

But a more immediate short-term task for the board will be helping Menzel and commissioners decide whether to leave the Municipal Employees’ Retirement System (MERS). Commissioners have expressed unhappiness with MERS’ investment strategy for county funds, the transparency of its reporting methods, and its refusal to accommodate an extended amortization schedule for Grand Traverse County.

During an April 27 board discussion on pension debt, Commissioner Addison “Sonny” Wheelock said MERS promised a nearly 8 percent return rate last year, but delivered only 2.6 percent. “They lost half a million dollars for us,” Wheelock said. “They are not doing their job.” While acknowledging the county’s own responsibility for its accumulating retirement liabilities, Wheelock also noted that Grand Traverse County continues “to be further and further in the hole” each year even while making its annual required MERS payments.

“MERS is accepting no responsibility for this whatsoever,” Wheelock said. “As far as I’m concerned, we need to get out of MERS as fast as we can and as soon as we can.”

Commissioners Carol Crawford, Christine Maxbauer and Alisa Kroupa also expressed support for exploring other pension plan providers. “(MERS)’ return on investment is abysmal,” Maxbauer tells The Ticker. “And their actuarial tables are inaccurate. It’s not to say (leaving’s) what we’ll do…but what we’ve been doing to date isn’t working.”

Commissioners concede that withdrawing from MERS would likely be a messy and protracted process – a fact Menzel also acknowledges.

“It’s a serious and big decision,” he says. “It puts all the responsibility on you as an organization to make sure you’re managing that investment wisely. You need a transition plan, and you need to be sure it’s extremely well thought-out.”

Menzel says the county has two options if it leaves MERS: transfer the pension plan to an insurance company, or develop a defined investment strategy with the pension board. The county could then use an annual request-for-proposals (RFP) process to hire professional management firms to handle the county’s bond and equity investments.

The insurance route would provide stability, but would require funding the plan at a rate likely beyond 100 percent, says Menzel. It would also mean bonding. Managing the plan through an RFP would allow the county to annually evaluate its return rate and ensure its investments were maximized – but would require a more intensive hands-on approach.

In either scenario, “it’s not an easy process of leaving (MERS) and putting those funds somewhere else,” Menzel says. “But we have to look at the long-term picture…and ask if this is the kind of organization that can take us where we need to be.”

MERS representatives says they’re willing to work with county officials to address their concerns. “We work closely with our members to help them meet their financial goals,” says MERS Marketing Director Jennifer Mausolf. “We’ve been up to the county multiple times to present (reporting) information. We also present an annual actuarial report that provides information about the funding levels and projections.” The MERS board of directors will also meet with Menzel in Lansing in July to discuss extending the county’s amortization schedule, Mausolf says.

But MERS has also hinted at playing hardball if the county tries to leave – a scenario that doesn’t sit well with county officials, who believe their contract allows them to exit without penalty. Mausolf tells The Ticker that in MERS’ 70-year history, only two municipalities have exited – one that privatized, and one MERS ordered out for non-payment. Mausolf says that if Grand Traverse County wants to withdraw, MERS would first require the county to “fully fund its plan.” The county’s plan is only 48 percent funded now.

“We do ask that they have enough assets to pay for the retiree benefits…(in order) to transition out,” Mausolf says.

Menzel says MERS trying to enforce that position “would probably mean litigation” if the county decided to leave. “We have the right to take our money and our liabilities and go,” he says. “Those are our funds.” Still, Menzel says he wants to sit down with MERS officials and look at not only the county’s amortization schedule, but MERS’ reporting and investment methods to see if a better arrangement can be reached.

“It’s in their best interest to work with us and not have us leave,” he says.