Trustees Of Fire, Police Pensions Warned

Actuary Notes Board's Failure To Push City For Full Funding

April 22, 2009|By Annie Linskey | Annie Linskey,

Trustees overseeing Baltimore's troubled $1.5 billion police and fire pension system should hire an attorney and other experts to determine whether their past decisions have breached fiduciary responsibilities to retirees, fire union officials cautioned Tuesday.

Speaking to the board, Thomas Lowman, an actuary hired by unions to examine pension finances, said: "The plan is severely underfunded. You have to believe that someone is going to ask how we got here."

Trustees were "drawing a big bull's-eye" on themselves, Lowman said, by failing to ask the city to pay the full cost of pension obligations amid concern that the price was unaffordable.

"The sole duty of the trustees is not to worry about what the city can afford or not," he said. "The sole duty of the trustees is to ask for what the plan costs."

Stock market declines have greatly reduced the value of Baltimore's fire and police retirement system. But those losses will not be factored into the annual request for funds until 2011, and the contribution required from the city has still increased by $13 million this year.

Lowman noted that since 2003, the board's actuary has recommended three times that the assumed rate of return on one portion of the fund be lowered, but the board has never voted to do so.

"It is a material misrepresentation of costs of the plan to not change the assumption," Lowman said. "It is one of the reasons why the plan is underfunded today, and there are real questions about the city's ability to fund this plan going forward."

The effect of lowering the rate would be that the board would also have to vastly increase its funding request from the city - resulting in a potential $61.5 million increase this year.

The board has referred to the cash-strapped city's inability to pay as its reason for not making the request.

"It is like you are drawing a big bull's-eye on yourself saying: 'I'm not worried about asking for the right amount of money. I'm worried about what the city can pay,'" the union actuary said. "That is not your job."

The new advisers, Lowman said, could help the board ask: "Were the actions they took in the past incorrect? Should we have done something differently? What should we do now about it?"

Board members squirmed at any whiff of an accusation of wrongdoing. Pension board member Ted Weintraub said he had tried to make the city understand that the retirement system needed more cash.

"The books go to City Hall," he said. "Can we make them read it?"

The board will debate the matter and weigh the estimated $50,000 to $100,000 price tag of hiring a firm to provide new legal, actuarial and accounting advice during a closed meeting this month. New advisers would become the third group of outsiders examining the system.

In addition to the union actuary, City Council President Stephanie C. Rawlings-Blake has called upon the Greater Baltimore Committee to suggest reforms to the system.

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