The Arkansas Municipal League has irked police officers and firefighters by declaring its support for legislation aimed at reducing the cost of the Arkansas Local Police and Fire Retirement System to cities by trimming the retirement benefits of future members, officials representing police and firefighters told the system’s trustees Thursday.
The league’s annual convention adopted a resolution in June that said the cities lobby supports legislation “regarding the implementation of these options to help resolve the insolvency of some closed local police and fire pension plans,” startedbefore the Arkansas Legislature mandated that new uniformed personnel join the system, starting in 1983.
The options listed on the resolution include cities seeking more state and local funds, and “reduce current LOPFI cost, thereby making more funds available to support old plans by loweringthe multiplier [used in calculating retirement benefits] for new hires, establishing a minimum retirement age of 55, and reducing or eliminating the COLA [cost of living adjustment].”
System members may retire with full benefits at any age with at least 28 years of service credit, at the age of 55 with at least 20 years of service credit, or at the age 60 with at least five years of service credit, said David Clark, executive director for the system.
The system’s cost-of-living adjustment for retirees is 3 percent a year after a member has been retired for 12 months, he said.
Mark Hayes, general counsel for the league, told the system’s trustees that that there were “drafting errors” in the resolution.
“The intent was hopefully to start a proper dialogue .. to ensure that many of the folks sitting in the room right now can get a [pension] check five, 10, 15 years out,” he said, referring to more than 50 police officers and firefighters at the meeting.
Hayes said the aim is for any changes in the cost of living adjustment for retired members, the multiplier forcalculating retirement benefits, and the minimum retirement age to only affect new members of the system in the future.
But North Little Police Chief Danny Bradley, representing the Arkansas Association of Chiefs of Police, said the league’s resolution “caused quite a firestorm in our organization, and some of the other police and fire organizations in the state.”
The system’s retired members deserve the system’s generous benefits that are “a recruiting tool” to hire quality police officers, he said.
The system includes 6,016 paid working members with an average age of 38.9 years and 11.7 years of service and an average annual salary of $45,341, and 2,367 retired members with an average annual benefit of $8,892 according to the system.
Local governments contributed about $63 million to the system last year, while system members chipped in $19.3 million, said Clark.
The system’s investments were valued at $1.058 billion as of June 30 after earning an investment return of 2.5 percent over the past year, according to system investment consultant Larry Middleton of Stephens Inc.
The system’s unfunded liabilities totaled $583.4 million as of Dec. 31, 2011, according to the system. Unfunded liabilites are the amount by which the system’s liabilities exceed an actuarial value of the system’s assets. The system’s projected payback period is 30 years.
Roger Smith, a former state representative who represents several police and firefighter groups, told the trustees that, “It is never a good idea to take from somebody else’s pension money ... to take from LOPFI to help support the old [police and fire pension plans].”
The Arkansas Local Police and Fire Retirement System is better funded than the old police and fire pension plans partly because the system’s cities are required to pay enough money to the system to keep it actuarially sound, he said.
There were 143 closed local police and fire retirement plans with investments valued at $332 million and unfunded liabilities totaling $301 million as of Dec. 31, according to Clark and a report from the actuarial firm of Carriero & Associates of Little Rock.
The actuary said these plans have 63 working members with a total annual salary of $495,473 and 2,999 retired members with total annual pensions of $40.6 million, and local governments contributed $20.6 million to the plans last year.
Smith said voter approvalof a proposed constitutional amendment on the general election ballot - Issue No. 2 - would help cities with closed police and fire pension plans.
Among other things, the proposed amendment would allow a legislative body of a city or county, with the consent of a majority of voters in an election, to authorize bonds for retiring the local government’s unfunded liabilities for a closed local police and fire pension plan and a local sales tax to pay for the bonds.
The trustees later appointed trustees Beverly Lambert and Tim Webb to a subcommittee with two members of the Arkansas Fire and Police Pension Review Board to review possible options. Among other things, the board is charged with enforcing state laws governing funding of local and fire police pensionplans.
Clark said seven local police and fire pension plans still are projected by the board to be insolvent within the next 10 years if local authorities don’t supplement or restructure the funding methods for the plans. These plans are the Arkadelphia, Benton, DeWitt, Fayetteville, Pine Bluff and Russellville fire plans; and Pulaski County Fire Protection District 5, which covers the Sherwood area, he said.
Northwest Arkansas, Pages 9 on 09/07/2012