Township divides retirement account with library

BY TREVOR KEISER
Clarkston News Staff Writer
While cleaning up accounting snafus from the past, Independence Township officials discovered approximately $950,000 in a retirement fund account for employees of the prior Independence Township Library.
During the transition into the Clarkston Independence District Library in 2012, the legal agreement between the township and the City of the Village of Clarkston did not address “ownership” of the retirement account.
The township board voted 4-0 to divide the money with the library.
“This is a good thing for the township because it doesn’t hurt their cash position at all,” said Supervisor Pat Kittle. “These funds were not in any of our fund balance. This was in this retirement account, so from an operational standpoint this will have zero impact on the township.”
According to Independence Township Finance Director Wendy Hillman, prior to forming the district library with the city, the library operated on a millage and township general funds.
Library staff were considered township employees and received township employee benefits, including lifetime retiree health care funded through a Retiree Health Funding Vehicle (RHFV), maintained by the Michigan Employees’ Retirement System (MERS) for full-time employees hired before June 5, 2007, Hillman said.
The township’s RHFV with MERS is divided into seven divisions, general, fire, police, safety path, sewer, water, and library.
“With the establishment of the district library, eight members of the library staff became district library employees and now receive wages and benefits from the district library. Of those eight, five had been eligible as township employees to receive retiree health care through the RHFV,” she said. “One library staff member chose to retire prior to the separation from the township and is currently the only library retiree eligible to receive lifetime health care paid for by the township with the RHFV library division funds.”
To determine the district library’s share of the assets, Hillman said they reviewed the past 20 years of audited financial statements to identify revenue from property taxes and General Fund.
Hillman said the found 81 percent property tax and 19 percent operating transfers.
“Therefore, we concluded to split the MERS assets with the library division at the same percentages – 81 percent district library; 19 percent township,” she said. “The funds remaining with the library division will continue to be used to pay the retiree healthcare for the one former employee who retired prior to the separation, as identified in the agreement, as well as be used to offset the cost of the OPEB for the general employees.”
Estimated funding for one retired employee is $50,000, total. The district library will be responsible for $40,500 (81 percent) of that amount and the township will pay the remaining $9,500(19 percent).
With the remaining $900,000, the library will receive approximately $729,000, which will pay the retiree healthcare of the five employees who were previously eligible when they were considered township employees. The township will receive approximately $171,000, which they will use to pay down OPEB (Other than Pension Benefits) in the other MERS accounts.
The agreement distributes healthcare funding for the former township library employees, said David Gillam, of Johnson, Rosati, Schultz & Joppich P.C.
“So it’s not just the ownership and distribution of those assets, but the agreement also addresses the continuing obligation going forward for their responsibility for retiree healthcare for those employees,” Gillam said. “For the one that’s already retired and for the other ones, assuming they continue to be eligible for healthcare benefits upon retirement.”
Treasurer Paul Brown complimented Hillman and her team for the work they did.
“They spent a lot of time figuring out how to correctly do this in a way that would be transparent and we felt everyone could agree,” Brown said.

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