Firefighters demand pension investigation
The reasons are both economic and political, because one of the issues contested in the contract negotiations is whether to allow the town to amend pension plans.
STEVE REID
Editor & Publisher
sreid@lbknews.com
Longboat Key firefighters, while at an impasse over contract negotiations with the town, have requested through their Pension Board a complete investigation and analysis of the Fire Pension Plan.
The reasons are both economic and political, because one of the issues contested in the contract negotiations is whether to allow the town to amend pension plans during the term of an agreed upon contract. In short, the town seeks to maintain the right to alter pension benefits, as it deems necessary. Such changes would not be retroactive. The firefighters have maintained that the benefits should be defined and remain fixed during the course of an agreed upon contract.
The demand for an investigation is based on the desire for the majority of firefighters to have an independent authority give a clear explanation of how and why the retirement pension fund shows a more than $10 million unfunded liability. In general terms, that means the town has that amount in potential payment obligations above and beyond what is accrued in the fund itself. The town’s actuary, Foster & Foster, has told both the Town Commission and the Pension Board that the unfunded liability is due primarily to the wrong assumptions made on rate of return for the pension investments over several years as well as a fundamental shift in how the town paid back the unfunded liability starting in 2003.
The move for the forensic investigation, while in the midst of contract negotiations, brings the possibility of unintended consequences. One Firefighters Pension Board member who opposed the investigation said such an investigation could work against the firefighters and by further showing the financial burden to the Town that the pensions impose.
What the firefighters hope is that a lucid explanation of how the liability mushroomed over the past decade will show that is neither the funding levels nor the pensions that are the problem, but rather willful or unwillful mismanagement.
In the Request for Proposal submitted to Town Hall, the Longboat Key Firefighters Retirement System wrote that it is “requesting proposals for an independent third party consultant to provide forensic auditing, actuarial and fiduciary consulting services to the Retirement System.”
The RFP asks that the bidder prepare findings and conclusions addressing:
• Explanation for current level of Retirement System’s unfunded liability.
• What decisions made by the “responsible parties” precipitated the current unfunded liability? “Responsible parties” includes but is not limited to:
1. Town of Longboat Key (Retirement System sponsor)
2. Firefighters union (negotiating party for specified benefits)
3. Board of Trustees (administers the fund)
4. Retirement System’s service professionals (i.e., actuary, auditor, financial consultant, attorney, etc.)
• Itemized description of Retirement System’s costs since Oct.1, 1999, ultimately contributing to current unfunded liability level. Study should focus and quantify, in both dollars and as a percentage, each of the following separately:
1. Changes in assets
2. Changes in liability
3. Changes in unfunded liability
4. Investment performance
5. Actuarial investment losses
6. Benefit increases
7. Changes in actuarial assumptions (show salary and turnover separately) and methodologies
8. Changes in actuarial funding methods
9. Changes in amortization of unfunded liabilities
• Opinion on whether or not identified decisions were proper and in accordance with generally accepted practices/principles.
• Forensic review of the activities of named fiduciaries to the Retirement System, focusing primarily on any conflicts of interest, undisclosed financial arrangements, breaches in professional standards.
• Analysis of fund investment performance to date.
• Analysis of fund asset allocations.
• Opinion on whether sinvestment decisions (i.e., asset allocation, investment manager selection, investment management fees, etc…) were proper and in accordance with generally accepted practices/principles.
