Retired Missouri employee Rick Dahl draws more than $467,000 a year from his state government pension.
How did he end up drawing such a generous guaranteed lifetime benefit? Dahl served as the chief investment officer of the Missouri State Employees' Retirement System, also known as MOSERS, from 1995-2016.
MOSERS retirees receive pensions based on factors such as their final average salary and years of service. According to his contract with MOSERS, when Dahl retired, his state salary was $462,094, plus he got incentives based on the performance of MOSERS investments.
Counting his annual bonuses as part of his salary boosted Dahl's pension, which totaled $467,072 in the last fiscal year.
Sen. Denny Hoskins, R-Warrensburg, was shocked when told of Dahl's pension.
"Whoa," Hoskins said. "So he's retired and making $467,000? Holy moly. That seems crazy."
Rep. Deb Lavender, D-Manchester, who sits on the House Budget Committee, said she was surprised that Dahl drew such a high amount. She said there should be a ceiling on how much a state employee can draw in benefits.
"Why the state would be paying a single employee $400,000 a year in retirement seems out of balance with the salary structure in Missouri," Lavender said.
Due to a law passed in 2010, state employees now contribute 4 percent of their pay to their retirement. At the time Dahl was hired, he did not have to contribute to his pension.
Though Dahl contributed nothing, he draws more than twice the next-highest pension paid by the system.
Eligible retirees can qualify for annual cost-of-living adjustments, which explains why Dahl's pension has grown by almost $40,000 since his retirement in 2016. This year, the cost-of-living increase for eligible retirees was 5 percent.
Keith Brainard, a research director for the National Association of State Retirement Administrators, said Dahl added value to MOSERS through his investments, which is why his work is reflected in his high pension benefits.
"He had an excellent track record of investment," Brainard said. "He returned in value to the retirement system more than he made in salary."
How bonuses worked
Dahl worked under a contract with MOSERS that rewarded him with incentive pay worth up to 50 percent of his salary if the system's investments did better than the market. The contract spelled out the benchmarks that had to be met.
Dahl's contract provided bonuses even when the system lost money, if MOSERS did better than the benchmark. During the recession in 2008, MOSERS lost $1.8 billion. Despite this loss, Dahl received close to $114,000 in incentives that year.
In his last three years as investment manager, MOSERS' return ranged from a low of -2.64 percent to a high of 19.2 percent.
MOSERS is funded primarily from investments, as well as with employee contributions and state funds. When investment rates of return decline, taxpayers pay more.
In fact, taxpayers' payments to MOSERS have been climbing. In the fiscal year that begins July 1, taxpayers will contribute an estimated $576.3 million to MOSERS, up from $394 million in 2019.
Last year, MOSERS also received a one-time state payment of $500 million, which almost doubled what taxpayers paid into the system that year.
Because the system has less money than it needs to pay the benefits promised in the long term, MOSERS is on the Joint Committee on Public Employee Retirement watch list. It has been on that list since 2016.
High pension raises concerns
In the seven years since he retired, Dahl has amassed more than $3 million from his pension.
Hoskins, who sits on the Senate Appropriations Committee, questioned whether Dahl's bonuses should have been counted as part of his salary for the purpose of calculating his pension.
"I don't know if they should have included those bonuses in a defined-benefit plan. That really threw it out of whack," Hoskins said.
A defined-benefit plan is when the employer – in this case, state government – promises a check to employees until they die, based on pension calculations. These checks are not dependent on how the stock market does, but are guaranteed by tax money.
Current state law on retirement says that in pension calculations, pay excludes "any non-recurring single-sum payments." A pending bill in the Missouri Legislature would allow the MOSERS board to further define the word "pay" for pension purposes.
Rep. Barry Hovis, R-Cape Girardeau, sponsors the bill. Hovis chairs the Joint Committee on Public Employee Retirement.
He said that the bill would allow the MOSERS board to define pay in more concrete terms.
Dahl was a "chosen commodity," Hovis said, who knew how to invest effectively. Hovis stressed the importance of an effective pension system so people do not need to rely on state-funded social services.
"If pension systems are done correctly, it allows people to live better lives," Hovis said. "It may help keep them out of social services later in life."
MOSERS called Dahl's incentives "at-risk" compensation and not single-sum payments. The system said it administers plans in accordance with state and federal laws.
The incentive system was discontinued on June 30, 2016 – a month after Dahl retired.
In 2010, then-State Auditor Susan Montee raised concerns about the incentive system that rewarded Dahl and his investment staff. She questioned the necessity for paying MOSERS employees the incentives. Her findings echoed criticisms in a 2004 audit by then-Auditor Claire McCaskill.
Former MOSERS Executive Director Gary Findlay approved Dahl's contract. Findlay could not be reached for comment for this article. In response to the 2010 audit, he defended the incentives in the contract as a good deal for the state because of Dahl's investment prowess. He said the investment staff's decisions generated hundreds of millions of dollars for the system, thus saving taxpayers money.
After he retired as executive director of MOSERS, Findlay was elected by retirees to represent them on the MOSERS Board of Trustees. That 11-member board includes: two working state employees; one retiree member; two House of Representatives members; two state senators; two governor-appointed members; the state treasurer; and the commissioner of the Office of Administration.
Dahl, 58, got a degree in finance from MU in 1987 and worked for former state Treasurer Wendell Bailey. In 1989-1990, Dahl's salary was $25,680, according to the state's Official Manual.
In his last four years of work at MOSERS, Dahl's base salary jumped to more than $400,000, from $286,354 in 2011.
Despite many attempts to contact Dahl, he could not be reached for comment.
Andrew Biggs, state and local government pensions researcher for the American Enterprise Institute, said he does not think there is a "sweetheart" formula for those who run the system's pensions. He said that across the country, higher paid employees, such as employees in the pension system, do draw the highest pensions.
However, he said spiking, in the form of numerous bonuses toward the end of their employment, can in some cases be a reason for large pensions.
The average pension paid to employees on the MSEP plan, one of the retirement plans that MOSERS offers, is $14,364, according to the website.
Two hundred and three former employees drew more than $100,000 in the fiscal year of 2022. The top recipients include former judges, mental health doctors and administrators of regional universities, not including MU. MU has its own retirement system.
Findlay has the 10th-highest MOSERS pension, drawing $159,569 a year.
No former governors rank among the top 200 pensioners in the state. Five former governors draw state retirement checks. Their annual statewide officeholder pensions range from $41,158 to $66,910. Those who earned these checks include Christopher "Kit" Bond, who served eight years as governor and two as auditor, and John Ashcroft, who served as governor for eight years and more than eight years in other statewide offices.
Armando Ponce, a former psychiatrist at Fulton State Hospital, drew $220,000 -- the second highest pension in the MOSERS system. For more than three decades, he volunteered to partake in extensive overtime, making the hospital break room his living space to be on call. This boosted his overall pay, and thus, his pension.
"I worked practically every night," Ponce said. "That's why my pension is so high, because I worked all the damn time."
The Missouri Independent, www.missouriindependent.com, is a nonprofit, nonpartisan news organization covering state government and its impact on Missourians.