Police and Fire Pension Funds Face Insolvency

by Mark Friedman  on Monday, Sep. 17, 2012 12:00 am  

“How likely that is to occur remains to be seen,” Zimmerman said. “I suspect that will be a big hill to climb.”

The Legislature’s Joint Retirement Committee has held meetings and is keeping its eye on the pension funds, Clark said.

Zimmerman said the league has offered some suggestions to the PRB on how to improve the financial health of the systems. The PRB recently appointed a subcommittee to review the suggestions, which includes reducing benefits for those who will come into the system. The subcommittee’s first meeting is scheduled for Tuesday.

All the funds projected to be insolvent are locally administered and are closed to new members. Those local plans cover police and firefighters who were hired before Jan. 1, 1983.

As a result of a change in state law, the Arkansas Local Police & Fire Retirement System, known as LOPFI, also administers po-lice and firefighter pension plans for the police and firefighters who were hired after Dec. 31, 1982. LOPFI manages 143 plans with 6,016 active members as of Dec. 31, 2011. It has nearly $700 million in assets and $583 million in unfunded liabilities. Pension experts said healthy pension systems should be at least 80 percent funded; LOPFI’s, though, was at 65 percent at the end of 2011.

By comparison, the 15 closed police pension systems in Arkansas are 50 percent funded, while the 37 fire pension funds are at 51 percent. Volunteer firefighters also have closed pension funds. That pension plan is performing the best at a 79 percent funded ratio.

Good Times

About 15 years ago, the pension funds were performing so well that Pine Bluff city officials wondered what to do with the surplus of money after all the beneficiaries had been paid, said former Pine Bluff Mayor Jerry Taylor, who is now a state senator.

“The times were good, and the stock market was doing fine and the pension funds were growing quite rapidly,” he said.

Several local pension boards across the state were approving more retirement benefits for their police and firefighters.

In 2000, Pine Bluff firefighters in the pension plan received a $500-a-month increase per member to their pension plan, according to Miller, the city finance director.

“They were trying to get people who retired at a very low wage … up to something that was a livable wage,” he said.

 

 

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