A legal trust established to cover promised lifetime retirement benefits for Baton Rouge police officers is significantly underfunded, according to a new audit of the city-parish.
The Police Guarantee Trust Retirement Plan had net pension liabilities of just over $19 million and was only 53% funded at the end of last year, says the comprehensive annual report of the city-parish, released today.
“The stock market decline of 2008 combined with other demographic conditions such as an aging workforce and longevity of retirement have caused required contribution levels to increase,” the audit says. “Additionally, the rate of return accruing to deferred retirement option program ‘DROP’ participant accounts is 8.5%, which exceeds the long term expected rate of return on the trust’s investments.”
The legal trust was established in February 2000 as a single employer, defined benefit plan that would pay for certain guaranteed lifetime benefits for eligible employees. The plan is the result of 637 public safety employees voluntarily transferring from the City-Parish Employees’ Retirement System to the Municipal Employees’ Police Retirement System.
The plan is initially believed to have been funded adequately, but due to the aforementioned conditions the city-parish is not expected to have the monies needed to pay police department employees their promised benefits over the long term.
Auditors recommended the city-parish devise a plan to ensure the retirement plan is adequately funded—including adding extra contributions to the plan from general fund benefit changes.
The city-parish says it is seeking legal advice on how to close the funding gap. It also says it has made efforts, such as budgeting additional dollars and earmarking savings from the MPERS, to address the deficiency.
Auditors also found that an unidentified Metro Council member attended a political fundraising event and charged $800—the cost of travel and a ticket to the event—to a city-parish purchase card, a violation of state law. The matter was detected internally, and the council member paid back all costs.
