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Ballwin police face pension shortfalls under new benefit plan
By: Jim Erickson
The move of Ballwin police officers’ pension funds to the Missouri Local Government Employees Retirement System (LAGERS) has hit a bump that has dissatisfied members of the department.
At issue is the conversion of funds in police officers’ individual accounts in the former defined contribution pension program to LAGERS, a defined benefit plan whose retirement payments are based on each participant’s years of service and rate of pay.
The former police department plan, which had been in effect since 1969, had not been performing well in recent years, a fact that prompted police personnel to consider alternatives. Earlier this year, a substantial majority of those employees approved changing to the LAGERS program, which handles retirement funds for other employees of the city.
Under the switchover, police department employees are able to use their funds from the former program to buy years of service in the LAGERS plan.
The rub has been that the years of service many have been able to purchase aren’t equal to the number of years they’ve been on the job and won’t yield the level of retirement income they were counting on. The situation is especially vexing for personnel nearing the end of their careers, with little time remaining to accumulate more years of service.
Reasons for the shortfall vary but probably the biggest factor has been that very few police department employees made profitable decisions on how to invest funds in their individual retirement program accounts. That situation, of course, isn’t unique to Ballwin police. Retirement portfolios of millions nationwide took a major hit during the economic and market downturn that began late in 2007-early 2008.
A key question the Ballwin Board of Aldermen discussed at a special session Sept. 10 was what, if anything, the city can or should do to help police personnel cope with their financial dilemma. No decisions were made, pending further study and gathering additional information.
The cost of providing all police department personnel with years of service retirement funding equal to their respective years on the job is estimated at several million dollars. The expense of assisting only those close to retirement is less but poses a question of fairness, not only to others in the department but to other city employees – none of whom would receive extra benefits.
Noting that there are more questions than answers, Alderman Frank Fleming (Ward 3) recommended no action by the Board until more information is assembled and analyzed.
1 Comments
It sounds like the police either didn’t make good decisions in managing their retirement accounts or the market has been down lately and their accounts haven’t performed as well as they would have liked. So they’re trying to jump over to a new defined benefits plan because they see it as a way to magically increase their accounts? Where does the money come from? Also, these defined benefit plans need to go as they’re a big reason governments are having budgetary problems. The public can’t afford to have city, county and state workers put in 30 years, “retire”, and then live off a generous pension for the next 30 years. It’s going to bankrupt us. We need to move toward having everyone (including social security) on only 401k-type systems where you get extra money up front from an employer to invest toward retirement. It’s so much less risky than the government having to worry about the liabilities of having to pay millions of dollars down the road when people retire.