Those covered by Joplin's troubled Police and Firemen's Pension Fund will soon be asked to vote on a change to the plan's rules that would allow the city to use proceeds of a half-cent sales tax to secure the underfunded plan.
Members of the pension plan's board of trustees met in special session Thursday to consider language for a ballot proposal. The board intends to hold an election on the issue in upcoming weeks.
Pension trustees are preparing for the possibility that city voters will be asked in November to approve a half-cent sales tax increase that would go toward elevating the funded level of the plan. The City Council has not approved a ballot measure yet but will have to consider it before Aug. 24 in order to get it on the Nov. 5 ballot. First, though, those covered by the plan must agree to the change.
Currently, the pension fund 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 is now contributing more than $2 million a year, but the funded ratio has not moved up much.
It is likely that the proposal for both pension members and voters will be whether to implement a half-cent increase in the city's general sales tax, which is now 1 cent, with the proceeds committed to the pension fund. It is projected that a half-cent tax would create $6 million to $7 million a year for the fund. It also would pay to convert new public safety employees to a state retirement plan. That would enable the city-funded pension to be closed when the last benefits to existing participants are paid out.
Because of the amount of projected revenue, city officials are considering proposing to voters that the tax would expire in 12 years. The ballot language for both elections may ask that the tax be put in place until it raises the funding level of the plan to 120 percent, or for 12 years. The 120 percent funding level would help keep the fund solvent if there is a market downtown or some other factor that would diminish its assets.
Trustees on Thursday looked at language that would change the plan's rules. The change was written by the board's attorney, Alan Kandal, of Husch Blackwell in St. Louis.
Trustee John Alford, who represents firefighters, said he wants language added that would make it clear that if the tax revenue did not generate the same amount of money as the annual percentage that the plan's actuary recommends, the city would be obligated to cover the difference. Currently the amount the city is paying in is based on the actuary's recommendation.
Trustee Marshall Hogue, an investments adviser, said that under state law the city has an obligation to do that anyway. Alford said that it then should be no problem to write it into the plan's rules.
Alford also said that the rules should say the city is obligated to maintain the plan until the last benefits are paid.
Hogue said the pension board could buy an insurance annuity to pay those last benefits to close out the plan. He said language written into the plan today could tie the hands of future trustees.
Alford said he just wants the plan to say the city is responsible to see that all benefits are paid.
Kandal, contacted by telephone, said the language sought by Alford could be added, and the board agreed that should be done.
Board member Larry Swinehart said he had been asked by retirees to find out if the board could hire a second attorney to review the proposed election plan language. The board agreed, and City Attorney Peter Edwards is to see that is done.
The rewritten language will be reviewed next week at a regular meeting scheduled for the board.
The city’s finance director, Leslie Haase, last year told the City Council that the underfunded pension plan is one of the major issues hampering the city’s financial sustainability.