Lawmakers asked to open LAGERS to more pension programs
Friday, January 17, 2014
If Missouri lawmakers and Gov. Jay Nixon agree, Jefferson City government’s management of its older Firefighters Pension Fund could become a thing of the past.
The fund’s board supports the idea of turning the management of the fund over to the state’s Local Government Employees Retirement System (LAGERS).
“Right now, the monthly payments to our retirees and survivors are made by personnel in the Jefferson City Finance Department,” Norm Robinson, the Jefferson City board’s vice chairman, told the state’s House Retirement Committee on Thursday. “If we were to move the retirees and survivors into LAGERS, that would eliminate the need for the city staff to actually make these payments.
“Essentially, it would get the city out of the pension business — which we think is a good thing.”
Robinson is a civilian member of the pension board, appointed by the mayor.
But he also is the retired executive director of MPERS — the Highway Department and Highway Patrol Employees Retirement System.
So he understands pension planning and pension fund operations.
Interim City Administrator Drew Hilpert sees “no downside from my perspective” to having control of the Fire Pension board move from the city to LAGERS, “as the legislation and proposed rules are now.”
But LAGERS can’t agree to the change unless there first is a change in state law.
Since February 2011, new hires in the Jefferson City Fire Department automatically are enrolled in the LAGERS retirement program.
But state law didn’t allow the existing pension fund also to be turned over to the state agency. So, the city had to continue operating the “closed” system for its active beneficiaries.
“We currently have 60 retirees and survivors, combined,” Robinson testified. “We have about $17.8 million (in funds) — our funded status is 106 percent — so, we are fully funded.”
Jennings, in North St. Louis County, made the switch in 1987, “so we are down to 43 retirees and 4 actual, active members,” said Joe Zlotopolski, the city’s Public Safety director and chairman of the Fire/Police Pension Plan.
He also told the House committee Thursday: “For quite some time, we’ve been looking for a place to move our pension to because, as time goes on, there’s nobody left in the community that has a vested interest in the plan.”
Jennings officials asked LAGERS to take over the older pension plan in 2012.
“That’s when they found out we needed to make a change in the law,” Zlotopolski testified.
Keith Hughes, LAGERS director, told the lawmakers his board unanimously supports the idea.
“This permits the local governments to take advantage of LAGERS administrative investment structure and scale that we have,” he said.
Hughes later told a reporter: “From an investment standpoint, we have full-time professionals who do that every day. They have made very good returns, historically — to the tune of, this year, we’re looking somewhere in the neighborhood of a 17.2 percent rate of return.”
Hughes reminded the committee that the General Assembly created LAGERS in 1967, to help local governments — like cities and counties — manage their employees’ retirement programs.
“Right now, we have over 650 employers” in the system, he said. “We have differing contribution rates for all 650 employers, because they pay based on their employee group and benefits selected.”
He told a reporter that LAGERS pays “18,000 people a month, with 25 staff people, across the whole state of Missouri,” so adding more small plans like Jefferson City’s “would be (a) very minimal cost for us.”
But for the city, Robinson testified, “We currently have costs for actuarial services, audit services, lab-healthy insurance, and we pay a fee to the city for administrative services.
“All of that can be mitigated by going into LAGERS, because they can spread that cost out over many different plans.”
Rep. Mike Leara, R-St. Louis County, chairs the Retirement Committee and sponsors the House bill.
“I want to make a note that this legislation is permissive,” he said. “It provides an option, NOT a mandate, to political subdivisions. However, once an agreement is made by the employer and LAGERS to administer the closed plan, that agreement is permanent.”
State Sen. Mike Kehoe, R-Jefferson City, sponsors the Senate bill, which has the same language as Leara’s House proposal.
“It’s one of those common-sense things,” he said Thursday afternoon. “It stops duplication, and you use an area that already exists to maximize the retirement system.”
Robinson said if lawmakers pass the bill and Nixon signs it, the Jefferson City Fire Pension Board will ask the City Council to approve moving the fund to LAGERS.
Hilpert said the city’s staff won’t make a recommendation until it knows what the bill’s final language is.
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