Corrective Action Plan (CAP) Process

What happens if a local government is given a determination of underfunded status? 

If a local government is notified by Treasury that they have been determined to be underfunded, the local government must submit a corrective action plan (CAP) for each underfunded system. Per Section 10 of the Act, CAPs are due within 180 days of the determination letter.

My local government received an e-mail from Treasury with a written notification that our waiver was disapproved. The e-mail included a corrective action plan form. Is my local government required to fill out this corrective action plan form?

Yes. You have received this notification because the State Treasurer has determined you have not adequately addressed your underfunded status, and therefore is not granting you a waiver of underfunded status. Every underfunded local government needs to create a corrective action plan for each underfunded system. Corrective action plan Forms 5597 for Retirement Health Benefit Systems and Form 5598 for Defined Benefit Pension Retirement Systems provides detailed instructions, including suggested actions, for your corrective action plan.

To verify which systems are underfunded, please go to Michigan.gov/LocalRetirementReporting. This information can be found in the Reports and Documents section by fiscal year.

Is there a way to contact Treasury about my waiver application disapproval or my corrective action plan?

Yes. If you would like to discuss your underfunded status, please schedule an appointment using the Local Retirement Calendar. A staff member will contact you at your scheduled time.

My local government’s waiver was disapproved, can we use the information from our waiver in our corrective action plan?

Yes. Any prior actions taken by your local government may be and are encouraged to be included in your corrective action plan.

Our local government failed to file the Form 5572 by the due date and was given a determination of underfunded status. Our audit shows that we meet the act’s funding requirements. Are we still required to submit a corrective action plan?

If your local government was determined to be underfunded for failure to file the Form 5572, rather than submitting a corrective action plan form(s) (Forms 5597/5598), you may submit the completed Form 5572 demonstrating your local government’s retirement system(s) do not trigger as underfunded. The Form 5572 is due back to Treasury within 180 days of this notification via email to LocalRetirementReporting@Michigan.gov.

Can we request a corrective action plan extension from the Municipal Stability Board (the Board)?

Yes, the Board may extend the 180-day deadline by an additional 45 days, if the local government submits an extension request and a reasonable draft of a corrective action plan. Please note, this extension request is for an additional 45 days from the original due date. You can find a template for submitting an extension request at the Board’s website.

My local government has more than one retirement system, but not all of them triggered underfunded status. Do we need to submit a corrective action plan for each system?

No. You only need to complete a corrective action plan for retirement systems that have triggered preliminarily underfunded status and do not have an approved waiver.

Are there two different corrective action plan forms?

Yes. Form 5597 is for Retirement Health Benefit Systems and Form 5598 is for Defined Benefit Pension Retirement Systems.

Where can I find the last versions of the correction action plan forms?

Corrective action plan forms can be found at: Michigan.gov/LocalRetirementReporting.

Please make sure to use the correct form number:

• Forms 5597 for Retirement Health Benefit Systems;
• Form 5598 for Defined Benefit Pension Retirement Systems.

What information should be provided in the corrective action plan?

The local government is responsible for determining the components of the corrective action plan. However, Form 5597 for Retirement Health Benefit Systems and Form 5598 for Defined Benefit Pension Retirement Systems provide detailed instructions for your corrective action plan.

The Municipal Stability Board that reviews corrective action plans has established best practices and approval criteria to assist with the corrective action plan development process. Please visit Michigan.gov/MSB for more information.

There is not enough room in the form’s input box to describe modern plan design changes, plan funding, or other considerations. Can I include an attachment that allows for more space?

Yes. If your local government has additional actions that you have taken or plan on taking that do not fit in the form, please enter “see attachment X” and label that attachment accordingly.

Is there any information that should NOT be included with our corrective action plan?

Yes. Personal and confidential information that identifies specific individuals associated with the retirement systems should be redacted. This includes, but is not limited to, any two identifying factors such as plan participant names, dates of birth, social security numbers, etc.

Does my local government’s governing body need to approve the corrective action plan before it is submitted to the Municipal Stability Board?

Yes. As required by Section 10(1) of the Act, the local government’s governing body must approve the corrective action plan before submission to the Municipal Stability Board. Examples of governing body approval include signed minutes, signed draft minutes, excerpts of the minutes signed by the clerk, etc.

When is my corrective action plan due? 

Completed corrective action plans are due back to Treasury within 180 days of your email notification. Completed corrective action plans must be submitted via email to LocalRetirementReporting@Michigan.gov. The subject line of the email should be in the following format: Corrective Action Plan-20XX, Local Government Name (e.g. Corrective Action Plan-2019, City of Lansing).

What happens after my local government submits our corrective action plan to Treasury via email?

After receiving your corrective action plan, Treasury will provide the corrective action plan to the Municipal Stability Board (the Board) for their review. The Board will receive the corrective action plan submission at their next scheduled meeting. The Board shall then approve or disapprove the corrective action plan within 45 days from the date of the meeting.

We would like to update our corrective action plan(s) that was already submitted to Treasury. Can we withdrawal our submission?

You may request that your corrective action plan(s) submission be withdrawn if your local government’s corrective action plan(s) have not yet received a determination by the Board. You may request a withdrawal by sending an email to LocalRetirementReporting@michigan.gov. However, please note that this will not extend your corrective action plan due date. Failure to have a corrective action plan submitted by your due date may result in noncompliance.

Who reviews and approves my corrective action plan?

Section 7(1) of the Act established the Municipal Stability Board (the Board). The Board consists of all of the following members who are appointed by the Governor:

• One resident of this state representing state officials (serves as Chair);
• One resident of this state representing local officials;
• One resident of this state representing employees and retirees.

The Board will review and vote on the approval of corrective action plans submitted by local governments. The Board will also monitor each underfunded local government’s compliance with the Act, including its adherence to the corrective action plan. 

The Municipal Stability Board approved my corrective action plan. What are the next steps?

Section 10(5) of the Act states that a local government has up to 180 days after the approval of a corrective action plan to begin to implement the plan to address its underfunded status. The Municipal Stability Board will monitor each underfunded local government's compliance with the Act and any corrective action plan.

What does it mean to “begin to implement” your corrective action plan(s)?

Section 10(5) of the Act states that, “[a] local unit of government has up to 180 days after the approval of a corrective action plan to begin to implement the corrective action plan to address its underfunded status.” Implementing a plan is defined as taking measurable action on the steps outlined in your approved corrective action plan.

Treasury strongly recommends that you begin the process of compiling detailed supporting documentation to show that you are implementing your corrective action plan and making progress towards your funding status. This information may be required to be submitted to the Municipal Stability Board during the corrective action plan monitoring process.

The Municipal Stability Board disapproved my corrective action plan. What are the next steps?

If the Municipal Stability Board disapproves a corrective action plan, within 15 days the Board will provide an email notification to the local government detailing the reasons for the disapproval of the corrective action plan.

The local government has 60 days from the date of the notification to address the reasons for disapproval and resubmit a corrective action plan.

Where can I find the Municipal Stability Board’s meeting schedule?

The Municipal Stability Board’s meeting schedule can be accessed at Michigan.Gov/MunicipalStabilityBoard.

My corrective action plan has been approved by the Municipal Stability Board. Do I need to post this to my local government’s website?

Yes. As required by Section 5 of the Act, local governments must post their approved corrective action plan(s) on their website, or in a public place if the local government does not have a website.

The Municipal Stability Board (the Board) approved our corrective action plan; however, our local government would like to update our plan. Can we submit an updated plan for the Board to review?

Yes, your local government may submit an updated corrective action plan to the Board for review by sending an email to LocalRetirementReporting@michigan.gov.  The subject line of the email(s) should be in the following format: Updated Corrective Action Plan-20XX, Local Government Name, Retirement System Name (e.g. Updated Corrective Action Plan-2019, City of Lansing, Employees’ Retirement System OPEB Plan). Treasury will send an automatic reply acknowledging receipt of the email. Your email settings must allow for receipt of Treasury’s automatic reply. This will be the only notification confirming receipt of the application(s).

Alternatively, your local government can submit the updated corrective action plan to the Board during your corrective action plan monitoring period. For more details regarding monitoring, please visit our website.

What happens if my corrective action plan is disapproved?

If the Municipal Stability Board (the Board) votes to disapprove a corrective action plan that has been submitted, the Board shall within 15 days provide a notification and report to the local government detailing the reasons for the disapproval of the corrective action plan. The local government has 60 days from the date of the notification to address the reasons for disapproval and resubmit a corrective action plan for approval.

What happens if I do not submit a corrective action plan (CAP) within 180 days, request an extension, or resubmit a revised CAP after being disapproved?

If a local government fails to submit a corrective action plan for all underfunded systems within the statutory deadlines, the Municipal Stability Board (the Board) will determine the local government to be in noncompliance with the Act. If the Board determines that an underfunded local government is not in substantial compliance with the Act, the Board shall within 15 days provide notification and report to the local government detailing the reasons for the determination of noncompliance with the corrective action plan. The local government has 60 days from the date of the notification to address the determination of noncompliance.

What are the consequences of noncompliance?

A determination of noncompliance may have impacts on a local government that include, but are not limited to:

• The local government will be listed on the Michigan Department of Treasury website as noncompliant;
• According to Section 518 (5)(i) of Public Act 34 of 2001, the local government is not eligible to issue a municipal security for the purpose of funding defined benefit pension retirement plans or postemployment health care plans;
• Potential legislative changes could have additional impacts;
• Other impacts due to local press or constituent pressure.