Those covered by the city of Joplin's Police and Firemen's Pension Fund will be asked next month to vote on a change to the plan that would allow a city sales tax to pay into the fund.
Pension board trustees on Thursday unanimously voted to approve ballot language and to call an election among fire and police officers to vote on the proposal.
The purpose of the sales tax would be to produce revenue to fully fund all the benefits owed by the plan, which currently is underfunded. Currently, the pension has a funded ratio of about 63%, or enough money to cover about 63% of the benefits that are owed or will be owed in the future. The city and the trustees have worked more than a decade to increase that level.
The city’s annual contribution to the pension fund has gone up from 17% of payroll to around 31% in that time. It now amounts to about $2.8 million a year.
Lump sum payments totaling $2.5 million also were added in the last 10 years. The cost to the city during that time has been $11.8 million, according to the city finance director. The average contribution by the city per employee is now up to $12,000 a year.
Still, the funding level of the plan has not moved up much. It was at about 52% 10 years ago when the city started taking the measures to try to shore up the plan. Members also changed the plan after that, extending the time before retirement benefits could be collected from 20 to 25 years for new hires to reduce costs to the plan.
A half-cent sales tax is projected to raise about $6 million to $7 million that would move the plan forward faster than the current funding can do, city officials have said.
That proposed change to the funding for the plan must be approved by the pension members before the City Council decides whether to ask voters to approve the sales tax funding. There has been discussion that a half-cent increase in the city's general fund tax could be devoted to raising the funded level of the plan and secure all the current and future benefits owed under the plan.
Even if a sales tax were enacted, the city would still be responsible under state law to fund the plan if the sales tax did not generate enough to cover the amount the plan's actuary recommends each year, which is what the city now pays. Trustees last week voted to keep language in the plan that assured the city would still be responsible.
Because of the amount of projected revenue, city officials have discussed proposing to voters that the tax would expire in 12 years or when a funding level of 120% is reached. The 120% funding level would help keep the fund solvent if there is a market downtown or some other factor that diminishes the fund's assets.
If a sales tax were to be approved, new hires in the fire and police departments would be moved to a state retirement fund, LAGERS, so that once all benefits were paid from the pension to existing members it could be terminated. Tier 2 employees will have the voluntary option to move to LAGERS.
According to discussions Thursday, the pension plan election must run for a month. Members will be asked to cast their votes between July 15 and Aug. 9. They will be mailed a ballot and the question late next week.
Meetings to discuss the proposal with the fire and police department workers will begin Thursday, June 27.