In-Depth Look: FY 2025 Actuarial Valuation
The latest valuation includes several pieces of good news for MPERS stakeholders. Employer pension debt is declining, the system's funding level is rising, and the employer contribution rate is dropping significantly — even as employers continue making the required payments on their past debt, along with the additional payments the Board of Trustees has elected to require in order to pay down the oldest and largest debt base faster. Here’s what all that means.
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The Funded Ratio Is Rising
The “funded ratio” tells us how much of our promised benefits are backed by real assets. Over the last few years, MPERS has steadily improved:
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FY 2023: 76% funded
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FY 2024: 78% funded
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FY 2025: 82% funded
It’s not a one-year fluke — it’s a real upward trend.
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Employer Pension Debt (UAL) Is Shrinking
The employers' long-term debt — called the unfunded accrued liability (UAL) — dropped from about $794 million last year to about $658 million this year.
Even better: the oldest and largest piece of that debt (the 2014 cumulative bases) started at more than $801 million, is now about $494 million, and is on track to be fully paid off in about nine years. When that base rolls off, employers will feel significant relief.
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Membership Is Growing Again
COVID hit police agencies hard statewide. Active MPERS membership dropped from:
- 5,932 officers in 2019
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to 5,527 in 2022
But now it’s turning around:
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2023: 5,536
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2024: 5,636
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2025: 5,782
Some of this rebound is due to MPERS strictly enforcing the mandatory enrollment laws already in place. When every eligible officer is properly enrolled, costs are shared fairly, and the system becomes stronger.
And here’s the straightforward truth:
If MPERS had fully mandatory membership — with no opt-outs — the system would be even stronger, and both employers and officers would benefit from a broader base. It would also ensure that every eligible officer is covered for the essential survivor and disability protections that MPERS provides.
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Payroll Is Up — And That Helps
Department payroll rose from:
- $301 million in 2022
- $331 million in 2023
- $350 million in 2024
- $370 million in 2025
A note worth explaining: payroll does not include officers who entered DROP before July 1, 2021, but it does include those who entered after that date. That naturally increases the reported payroll.
Even with that nuance, the broader trend is clear: more officers enrolled and contributing = a stronger system.
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Investment Returns: Our Best Year Ever, Then a Tough One, Then a Recovery
Here’s what MPERS earned in the last four years:
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2021: +26.1% — the highest return in MPERS history
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2022: –10.4% — one of the worst years for public plans nationwide
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2023: +7.9%
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2024: +9.8%
- 2025: +10.8%
To keep contribution rates stable, MPERS uses a five-year “smoothing” method, which phases in big gains and losses gradually so employer rates don’t spike with the markets.
Here’s the important point for members:
- FY 2021’s record-setting gain won't be accounted for in next year's valuation.
- FY 2022’s loss (–10.4%) will remain in the smoothing formula for one more year.
Translation:
This year’s valuation looks very strong. Next year’s may not look quite as strong on paper — simply because the 2021 gain is gone and the 2022 loss is still in the formula.
No cause for alarm — just honest expectations.
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Why Employer Rates Were So High — And Why They’re Finally Falling
A fair question is: “Why have employer contribution rates been so high for so long?”
Here’s the short, easy-to-understand answer:
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For years, MPERS assumed a very optimistic 7.5% investment return.
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And until 2014, gains and losses were paid off over 30 years.
That combination kept rates artificially low early on but allowed debt to grow.
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Before 2003, losses were amortized over 15 years — Act 1079 of 2003 stretched that to 30 years.
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Act 402 of 2014 fixed this by combining all old debt and shortening the payoff to 20 years.
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All new gains/losses now amortize over 15 years — much healthier.
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Between 2017 and 2021, the MPERS Board lowered the assumed return from 7.5% to 6.75%.
These reforms were responsible — but they caused employer rates to rise in the short term. Now, stakeholders are seeing the payoff.
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Employer Rates Are Coming Down — With One Note of Caution
Here are the employer contribution rates:
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FY 2026: 33.475%
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FY 2027: 29.35%
That FY 2027 rate is the lowest in more than a decade.
And we’re still paying off debt responsibly:
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2.125% of the FY 2026 rate goes to the oldest UAL
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2.000% of the FY 2027 rate goes to the same
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0.85% each year goes to prefund COLAs
Nothing is being skipped or pushed back.
But here’s the caution:
The drop from FY 2026 to FY 2027 is unusually large — helped in part by the tail end of the FY 2021 investment gain. Since that gain has now fully rolled off, and the FY 2022 loss is still in the smoothing mix, another decline of this size is unlikely next year — and the employer rate could increase depending on several factors.
The long-term direction remains good; the one-year decline is simply unusually steep.
View this year's valuation here:
Actuarial Valuation - Year Ended June 30, 2025
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Bottom Line
Your retirement system is getting stronger:
- Higher funded ratio
- Less employer pension debt
- More officers covered and contributing
- Smoother investment performance
- A realistic long-term return assumption
- Lower employer rate for FY 2027
- Employers' oldest and largest debt base scheduled to be paid off in nine years
MPERS is on a healthier path.
The Board of Trustees and MPERS staff will keep doing the steady, disciplined work to safeguard the benefits earned by members. If you would like a walkthrough of these numbers, the MPERS staff is always available to assist.
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