Board approves pension increase

City board members unanimously approved Resolution 40-20 regarding a possible benefits increase in the city’s Firemen’s Relief and Pension Fund (the Local Plan) during the city board meeting on Aug. 18.

The resolution will allow the local pension board to go before the state pension board, which will use an actuary to determine whether or not there are sufficient funds to approve raises to the pension plan, according to City Administrator Phillip Patterson.

During the July 27 meeting of the pension board, a resolution was approved to seek a pay increase of five percent to full-paid retirees along with a cost of living adjustment of three percent to the nearest whole percent below that, Patterson said. Chief Jeremey Criner is unfamiliar with the term full-paid, but believes that is a full-time firefighter as opposed to a volunteer.

The pension board also

passed a second resolution requesting to increase benefits paid to volunteers or their surviving spouses $40 per month, Patterson said.

“It’s not necessarily approving the increase but improving the methodology and acknowledging to the state that you understand the risk,” Patterson said.

The Firemen’s Relief and Pension Fund is an old plan for firefighters hired before Jan. 1, 1983. Firefighters who have a hire date after that are enrolled in the Arkansas Local Police and Fire Retirement System (LOPFI).

The risk is that any increase in benefits has the potential to increase the amount that the city will have to pay LOPFI when the local plan is dissolved due to a minimum number of active members, Patterson said.

LOPFI will likely require all the unfunded liability at the time the Local Plan is dissolved, Patterson said. The current unfunded liability amount is $824,558, Patterson said.

The worst case scenario is that the plan will dissolve too quickly and none of the unfunded liability increase will have been recouped, Patterson said. The best case scenario involves all of the unfunded liability being recouped prior to the Local Plan being dissolved, Patterson said.

There are presently 14 full-paid retirees on the Local Plan and one volunteer retiree, Patterson said. The local plan will be dissolved when there are less than five members, Patterson said. Based on mortality rates, the Local Plan is estimated to remain in effect for at least 15 to 20 years, Patterson said.

Despite the risks, the city board was very supportive of approving the resolution. Director Brad Burns said he fully supported the resolution.

“It’s less risk than what we ask them to take when they serve because what we ask them to do when they serve is risk their lives to save lives and property,” Burns said.

Director Mindy Hunt asked Patterson and Finance Director Christina Petriches about the current unfunded liability amount and actuary evaluations from 2018 and 2019 which state the pension plan does not meet the necessary employer contribution, is not funded at least 97 percent and is not actuarially sound.

Petriches explained how the unfunded liability impacts the city.

“That is a liability on the city’s financial statements no matter what today,” Petriches said. “That will change again next year because the investments may come in higher or lower.”

The actuary evaluations are based on how the stock market performed the previous year. When the plan goes before the actuary at the state level they will determine how much the city can reasonably absorb before making a determination whether or not to give the Local Plan the increase, Petriches said.

The finance director said she herself is not an actuary so she is only able to give an overview.

Hunt said she felt a little better after Petriches explained this to her and said she supports the resolution.

“Just because I have questions does not mean I am not in favor of it,” Hunt said.