HomeMy WebLinkAbout2009-12-03 - Agendas - Final Fayetteville Policeman's Pension and Relief Fund
Meeting Date a- -3—OV �,�
aa /�e //Xor
Adjourn Time 3 Q,/ E
Attendees:
Subject: Subject:
Motion To: Motion To:
Motion By: Motion By:
Seconded: Seconded:
Mayor Jordan Mayor Jordan
Jerry Friend Jerry Friend
Tim Helder Tim Helder
Frank Johnson V�- Frank Johnson
Eldon Roberts ✓ Eldon Roberts
Melvin Stanley Melvin Stanley
Sondra Smith Sondra Smith
2
Subject: Subject:
Motion To: Motion To:
Motion By: 6 S Motion By:
Seconded: 1 � Seconded:
Mayor Jordan ✓ Mayor Jordan
Jerry Friend ✓ Jerry Friend
Tim Heider Tim Helder
Frank Johnson ✓ Frank Johnson
Eldon Roberts Eldon Roberts
Melvin Stanley Melvin Stanley
Sondra Smith Sondra Smith
Lioneld Jordan Chairman • Jerry Friend Retired Position 2
Sondra E.Smith TreasurerTayve e Tim Helder Retired Position 3
Eldon Roberts Secretary/Retired Position I Melvin Stanley Retired Position 4
V le
Frank Johnson Retired Position 5
ARKANSAS
Policemen's Pension and Relief Fund Board of Trustees
Special Meeting Agenda
December 3, 2009
A special meeting of the Fayetteville Policemen's Pension and Relief Fund Board of Trustees
will be held on December 3, 2009 at 1:30 PM in Room 326 of the City Administration Building
located at 113 West Mountain Street, Fayetteville, Arkansas.
Roll Call
Approval of the Pension List:
• Revised Pension List for December, 2009 Irene Haskins Deceased
• Revised Pension List for January, 2010 Irene Haskins Deceased
New Business:
• Irene Haskins Deceased
• Revenue/Expense Report—October 31, 2009
• 2010 Meeting Schedule
• Arkansas Attorney General Opinion No. 2009-102
• Alliant Driver Specialty Group Letter
Discussion Items:
POLICE PENSION FUND
December 2009 Revised 68M9800 seoo-0so0
Month 12 Regular Mo 5335-W 5335-05
12
EMP# NAME Benefit YTD Reg Benefit Suppl. YTD Suppl.
'54 ALLEN,CHARLES $ 2,584.64 $ 31,015.68 $ 50.00 $ 600.00
106 BAYLES,BOBBi J $ 1,587.41 $ 19,048.92 $ 50.00 $ 600.00
107 BLACK,JOE P $ 1,125.64 $ 13,507.68 $ 50.00 $ 600.00
147 BRADLEY,GERALD $ 4,820.09 $ 57,841.08 $ 50.00 $ 600.00
139 BRADLEY,RANDALL $ 2,860.17 $ 34,322.04 $ 50.00 $ 600.00
167 BROWN,JOHN $ 4,362.01 $ 52,344.12 $ 50.00 $ 600.00
157 CARROLL,RONALD L $ 2,106.04 $ 25,272.48 $ 50.00 $ 600.00
151 COLE,RUSTON $ 3,065.74 $ 36,788.88 $ 50.00 $ 600.00
109 COOPER,ADRIAN $ 638.42 $ 7,661.04 $ 50.00 $ 600.00
198 DENNIS,ANNA MARY $ 1,376.88 $ 16,522.56 $ 50.00 $ 600.00
160 DUGGER,GARY $ 3,163.74 $ 37,964.88 $ 50.00 $ 600.00
140 FOSTER,BILLY D. $ 3,207.35 $ 38,488.20 $ 50.00 $ 600.00
148 FRIEND,JERRY $ 3,152.68 $ 37,832.16 $ 50.00 $ 600.00
161 HANNA,JANICE $ 1,368.59 $ 16,423.08 $ - $ -
145 HANNA,MARK $ 1,368.59 $ 16,423.08 $ 50.00 $ 600.00
162 HASKINS,IRENE deceased $ - $ 8,604.20 $ - $ 550.00
169 HELDER,TIM $ 5,838.12 $ 70,057.44 $ 50.00 $ 600.00
180 HOYT.RICK $ 7,460.01 $ 89,520.12 $ 50.00 $ 600.00 -
146 HUTCHENS,BERNICE $ 1,825.54 $ 21,906.48 $ 50.00 $ 600.00
143 JOHNSON,CHARLES $ 2,455.50 $ 29,466.00 $ 50.00. $ 600.00
194 JOHNSON,FRANK $ 7,974.81 $ 95,697.72 $ 50.00 $ 600.00
103 JOHNSON,WENDELL $ 783.15 $- 9,397.80 $ 50.00 $ 600.00
118 JONES,BOB $ 3,300.45 $ 39,605.40 $ 50.00 $ 600.00
144 KILGORE,DONALD $ 2,046.48 $ 24,557.76 $ 50.00 $ 600.00
129 LAWSON,FORREST $ 1,567.90 $ 18,814.80 $ 50.00 $ 600.00
150 LITTLE,PATSY R $ 730.35 $ 8,764.20 $ 50.00 $ 600.00
153 LORCH,DONNA G deceased 5/27/09 $ - $ 3,651.75 $ $ 250.00
156 MARTIN,KENNETH $ 3,692.85 $ 44,314.20 $ 50.00 $ 600.00
128 MCCAWLEY,LARRY $ 1,694.79 $ 20,337.48 $ 50.00 $ 600.00
116 MCCHRISTIAN,MARIE deceased 07101109 $ - $ 5,112.45 $ - $ 300.00
,26 MCWHORTER,KAREN $ 1,012.10 $ 12,145.20 $ 50.00 $ 600.00
136 MITCHELL,MICHAEL $ 2,305.29 $ 27,663.48 $ 50.00 $ 600.00
141 MUELLER,ROSEMARY $ 2,063.93 $ 24,767.16 $ 50.00 $ 600.00
158 MUNSON,ANGELA $ 4,198.15 $ 50,377.80 $ 50.00 $ 600.00
112 MURPHY,JAKE $ 405.75 $ 4,869.00 $ 50.00 $ 600.00
137 PERDUE,LARRY $. 2,322.67 $ 27,872.04 $ 50.00 $ 600.00
164 PERSHALL,ROBIN $ 1,525.07 $ 18,300.84 $ - $ -
132 PHILLIPS,HOMER GENE $ 1,754.44 $ 21,053.28 $ 50.00 $ 600.00
199 PRESTON,NORMAJ $ 1,601.37 $ 19,216.44 $ 50.00 $ 600.00
135 RICKMAN,LOREN $ 2,231.07 $ 26,772.84 $ 50.00 $ 600.00
104 RIGGINS,RAYMOND C $ 1,669.37 $ 20,032.44 $ 50.00 $ 600.00
183 ROBERTS,ELDON $ 7,479.37 $ 89,752.44 $ 50.00 $ 600.00
183 ROBERTS,ELDON Plus 25 add pay $ 1,029.98 $ 12,3%76 $ - $ -
159 SCHUSTER,JOHN H. $ 3,117.36 $ 37,408.32 $ 50.00 $ 600.00
168 STANLEY,MELMN $ 4,880.07 $ 58,560.84 $ 50.00 $ 600.00
155 STOUT,BETTY $ 866.51 $ 10,398.12 $ 50.00 $ 600.00
133 SURLES,JERRY $ 2,721.40 $ 32,656.80 $ 50.00 $ 600.00
142 TAYLOR,DENNIS $ 2,063.93 $ 24,767.16 $ 50.00 $ 600.00
106 UPTON,FRANKLIN $ 1,057.08 $ 12,684.96 $ 50.00 $ 600.00
163 WATSON,RICHARD $ 6,947.05 $ 83,364.60 $ 50.00 $ 600.00
163 Watson,Richard Plus 25 Add'I Pay $ 948.76 $ 11,385.12 $ - $ - -
149 WILLIAMS,JOYCE $ 2,539.66 $ 30,475.92 $ 50.00 $ 600.00
195 WITT,BETTY J $ 1,766.83 $ 21,201.96 $ 50.00 $ 600.00
127 WOOD,PAUL J $ 1 580.93 $ 18,971.16 $ 50.00 $ 600.00 _
$ 134,246.08 $ 1,628,321.36 $2,350.00 $ 29,300.00
POLICE PENSION FUND
January 2010 Revised 6800-9800 6000-9800 ,
Month 1 Regular Mo 533500 533505
. 1
EMP# NAME Benefit YTDRegBenefit Suppl. YTD Suppl.
154 ALLEN,CHARLES $ 2,584.64 $ 2,584.64 $ 50.00 $ 50.00
206 BAYLES,BOBBI J $ 1,587.41 $ 1,587.41 $ 50.00 $ 50.00 .
107 BLACK,JOE P $ 1,125.64 $ 1,125.64 $ 50.00 $ 50.00
147 BRADLEY,GERALD $ 4,820.09 $ 4,820.09 $ 50.00 $ 50.00
139 BRADLEY,RANDALL $ 2,860.17 $ 2,860.17 $ 50.00 $ 50.00
167 BROWN,JOHN $ 4,362.01 $ 4,362.01 $ 50.00 $ 50.00
157 CARROLL,RONALD L $ 2,106.04 $ 2,106.04 $ 50.00 $ 50.00
151 COLE,RUSTON $ 3,065.74 $ 3,065.74 $ 50.00 $ 50.00
109 COOPER,ADRIAN $ 638.42 $ 638.42 $ 50.00 $ 50.00
198 DENNIS,ANNA MARY $ 1,376.88 $ 1,376.88 $ 50.00 $ 50.00
160 DUGGER,GARY $ 3,163.74 $ 3,163.74. $ 50.00 $ 50.00
140 FOSTER,BILLY D. $ 3,207.35 $ 3,207.35 $ 50.00 $ 50.00
148 FRIEND,JERRY $ 3,152.68 $ 3,152.68 $ 50.00 $ 50.00
161 HANNA,JANICE $ 1,368.59 $ 1,368.59 $ - $ -
145 HANNA,MARK $ 1,368.59 $ 1,368.59 $ 50.00 $ 50.00 _
162 HASKINS,IRENE deceased $ - $ - $ - - $ -
169HELDER,TIM $ 5,838.12 $ 5,838.12 $ 50.00 $ 50.00
180 HOYT,RICK $ 7,460.01 $ 7,460.01 -$ 50.00 $ 50.00
146 HUTCHENS,BERNICE $ 1,825.54 $ 1,825.54 $ 50.00 $ 50.00
_ 143 JOHNSON,CHARLES $ 2,455.50 $ 2,455.50 $ 50.00 $ 50.00
194 JOHNSON,FRANK $ 7,974.81 $ 7,974.81 $ 50.00 $ 50.00
103 JOHNSON,WENDELL $ 783.15 $ 783.15 $ 50.00 $ 50.00
118 JONES,BOB $ 3,300.45 $ 3,300.45 $ 50.00 $ 50.00
144 KILGORE,DONALD $ 2,046.48 $ 2,046.48 $ 50.00 $ 50.00
129 LAWSON,FORREST $ 1,567.90 $ 1,567.80 $ 50.00 $ 50.00
150 LITTLE,PATSY R $ 730.35 $ 730.35 $ 50.00 $ 50.00
153 LORCH,DONNA G deceased 5/27/09 $ - $ - $ - $ -
156 MARTIN,KENNETH $ 3,692.85 $ 3,692.85 $ 50.00 $ 50.00
128 MCCAWLEY,LARRY $ 1,694.79 $ 1,694.79 $ 50.00 $ 50.00
116 MCCHRISTIAN,MARIE deceased 07101109 $ - $ - - $ - $ -
126 MCWHORTER,KAREN $ 1,012.10 $ 1,012.10 $ 50.00 $ 50.00
136 MITCHELL,MICHAEL $ 2,305.29 $ 2,305.29 $ 50.00 $ 50.00
141 MUELLER,ROSEMARY $ 2,063.93 $ 2,063.93 $ 50.00 $ 50.00
158 MUNSON,ANGELA $ 4,198.15 $ 4,198.15 $ 50.00 $ 50.00
112 MURPHY,JAKE $ 405.75 $ 405.75 $ 50.00 $ 50.00
137 PERDUE,LARRY $ 2,322.67 $ 2,322.67 $ 50.00 $ 50.00
164 PERSHALL,ROBIN $ 1,525.07 $ 1,525.07 $ - $ -
132 PHILLIPS,HOMER GENE $ 1,754.44 $ 1,754.44 $ 50.00 $ 50.00
199 PRESTON,NORMA J $ 1,601.37 $ 1,601.37 $ 50.00 $ 50.00
135 RICKMAN,LOREN $ 2,231.07 $ 2,231.07 $ 50.00 $ 50.00
104 RIGGINS,RAYMOND C $ 1,669.37 $ 1,669.37 $ 50.00 $ 50.00
183 ROBERTS,ELDON $ 7,479.37 $ - 7,479.37 $ 50.00 $ 50.00
183 ROBERTS,ELDON Plus 25 add pay $ 1,029.98 $ 1,029.98 $ - $ -
159 SCHUSTER,JOHN H. $ 3,117.36 $ 3,117.36 $ 50.00 $ 50.00
168 STANLEY,MELVIN $ 4,880.07 $ 4,880.07 $ 50.00 $ 50.00
155 STOUT,BETTY $ 866.51 $ 866.51 $ 50.00 $ 50.00
133 SURLES,JERRY $ 2,721.40 $ 2,721.40 $ 50.00 $ 50.00
142 TAYLOR,DENNIS $ 2,063.93 $ 2,063.93 $ 50.00 $ 50.00
106 UPTON,FRANKLIN $ 1,057.08 $ 1,057.08 $ 50.00 $ 50.00
163 WATSON,RICHARD $ 6,947.05 $ 6,947.05 $ 50.00 $ 50.00
163 Watson,Richard Plus 25 Add'I Pay $ 948.76 $ 948.76 $ - $ -
149 WILLIAMS,JOYCE $ 2,539.66 $ 2,539.66 $ 50.00 $ 50.00
195 WITT,BETTY $ 1,766.83 $ 1,766.83 $ 50.00 $ 50.00
127 WOOD,PAUL $ 1,580.93 $ 1580.93 $ 50.00 $ 50.00 _
$ 134,246.08 $ 134,246.08. $2,350.00 $ 2,350.00
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POLICEMEN'SPENSION&RELIEF FUND AFFIDAVIT
STATE OFARKANSAS > RECEIVED `
COUNTX OF WASHINGTON JAN $'3 2009
do solemn/ swear that-W&
hat OF FgYETTEy(LIE
I, Y CIiYClERK50FFlCE
(Please check the appropriate statement below)
1. I am a former policeman for the Fayetteville Police Department.
2. v%,/I am the spouselformer spouse/widow of a formerpoliceman for the Fayetteville Police Department,and that I
have not remarried since becoming eligible for benefits.
3. _I am an eligible dependent of a former firefighter for the Fayetteville Police Department and submitted the
attached-school affidavit for verification of school attendance.
4. I presently receive benefits from the Fayetteville Policemen's Pension and Relief Fund and I am eligible to
continue receiving the pension fund benefits as governed under state law.
Address:
Telephone:
Social SecurityNo.: Birth Date: .
PLEASELISTALLBENEFIC1ARIES BELOW: (Complete this section for spouse,minor children and/or children under 23 years
of age enrolled in an institute of higher education only)
NAME SOCIAL SECURITY No. BIRTHDATE RELATIONSHIP
DATED this day of ao9'
store
Parent/Guardian Signature
NPWAtB fill,
SSI RIBED befo me, a Notary Public, this day of
i f'UB410�b f�,� Notary Public
ii •stip/ d
roa
My Commission Expires:
(TWsaffidavitisnquindannu l"theroic 'sPeaaimand Relieflund Boanl ofTrusteesanduostliepwperlycomplaedendraunWtotbeFayeaevi0e
City Clerk,113 Wal Mountain.Fsyettevillq Arkansas,72701 by January 31s each year.)
Dolice Pension Fund Revenue Expense Summary
10/3112009
2009 2008 2007 2006 2005 2004
Revenues:
Employee Contributions $ $ $ $ 4,139.00 $ 5,193.00 $ 11,829.00
Employer Contributions $ $ $ 8,278.00 $ 10,385.00 $ 23,658.00
State Insurance Tax $ 214,429.30 $ 186,429.42 $ 190,192.00 $ 226,826.00 $ 353,271.00 $ 232,007.00
Local Millage(A mills) $ 281,071.96 $ 441,696.50 $ 388,877.00 $ 370,649.00 $ 339,416.00 $ 295,409.00
10% City Fines and Forfeitures $ 106,051.60 $ 131,583.83 $ 106,385.00 $ 119,147.00 $ 126,833.00 $ 126,833.00
Sale of Confiscated Goods $ 8,107.79 $ 7,715.61 $ 10,806.00 $ 6,343.00 $ 120.00 $ 1,160.00
Interest and Dividends $ 201,130.58 $ 359,998.26 $ 356,699.00 $ 373,776.00 $ 347,752.00 $ 382,333.00
Gain (Loss) on Sales $ 139,559.51 $ (885,460.76) $ 395,378.00 $ 420,298.00 $ 231,691.00 $ 243,083.00
Police Supplement $ 45,000.00 $ 30,000.00 $ 30,000.00 $ 30,300.00 $ 31,275.00 $ 30,600.00
Future Supplement $ 38,350.00 $ 41,370.00 $ 86,040.00 $ 60,060.00 $ 51,199.00 $ 33,140.00
Misc Revenue $ 4,916.79 $ 161.46 $ 907.00 $ 1,126.00 $ 2,401.00 $ 536.00
Total Revenue $ 1,038,617.53 $ 313,494.32 $ 1,565,284.00 $ 1,620,942.00 $ 1,499,536.00 $ 1,380,588.00
Expenditures
Regular Monthly Benefits $ 1,3.59,047.00 $ 1,638,067.76 $ 1,581,319.00 $ 1,456,466.00 $ 1,362,068.00 $ 1,226,282.00
Police Supplement $ 24,550.00 $ 30,000.00 $ 30,000.00 $ 29,600.00 $ 29,800.00 $ 30,600.00
Future Supplement $ 36,816.00 $ 41,370.00 $ 86,040.00 $ 60,060.00 $ 48,245.00 $ 33,140.00
Investment Manager Fees $ 67,454.98 $ 82,754.75 $ 87,712.00 $ 86,243.00 $ 86,672.00 $ 87,994.00
Other Expenses:
Office Supplies/printing $ 84.00
Audit Fees $ 3,500.00 $ 3,500.00 $ 3,500.00 $ 3,300.00 $ 3,210.00 $ 3,700.00
Professional Services $ 2,000.00
Legal Fees $ 1,025.00
Bank Fees $ 152.85 $ 203.21 $ 195.00 $ 156.00 $ 156.00 $ 220.00
Total Expenses $ 1,491,604.83 $ 1,795,895.72 $ 1,788,766.00 $ 1,636,850.00 $ 1,532,151.00 $ 1,381,936.00
Net Income(Loss) Before Market Adj*** $ (452,987.30) $ (1,482,401.40) $ (223,482.00) $ (15,908.00) $ (32,615.00) $ (1,348.00)
Market Adjustment $ (1,291,031.77) $ 151,740.00 $ 344,973.00 $ (361,860.00) $ 20,566.00
Net Income (Loss) $ (452,987.30) $ (2,773,433.17) $ (71,742.00) $ 329,065.00 $ (394,475.00) $ 19,218.00
Book Value Total Reserve Assets* $ 7,945,212.13 $ 8,398,199.43 $ 9,880,601.00 $ 10,104,083.00 $ 10,119,990.00 $ 10,152,607.00
Market Value Total Reserve Assets* $ 8,078,777.39 $ 8,046,355.52 $ 10,819,789.00 $ 10,891,530.00 $ 10,562,465.00 $ 10,956,940.00
*Assets less any liabilities
**Market Value calculated at year end
12/3/2009 C:\DOCUME-1\ssmith\LOCALS-1\Temp\XPgrpwise\Police Pension Summary.xls tl
2010 Meeting Schedule
Policemen's Pension and Relief Board of Trustees
Third Thursday of the First Month of each Quarter
1:30 PM - City Administration Room 326
January 21, 2010
April 15, 2010
July 15, 2010
October 21, 2010
FAYET I'EVILLE
THEMY OF FAYETTEVILLF.ARKANSAS
KIT WILLIAMS,CITY ATTORNEY
DAVID WHITAKER,ASST.CITY ATTORNEY
E .RTMENTAL CORRESPONDENCE LEGAL DEPARTMENT
TO: Lioneld Jordan, Mayor
Sondra Smith, City Clerk
Fire Pension Board
Police Pension Board
FROM: Kit Williams, City Attorney
DATE: November 10, 2009
'RE: Arkansas Attorney General Opinion No. 2009-102
I would like to thank the Attorney General again giving his well researched
best effort to decipher this area of pension law which he correctly states is "not
entirely clear" and "invites judicial or legislative clarification." The Attorney
General's Opinion states: "I did not opine definitively that the Board cannot reduce
benefits." (Page 3 of Arkansas Attorney General Opinion no. 2009-102)
However, the Attorney General cautioned against a benefit reduction.
"Regarding a possible constitutional prohibition, while it is my opinion that such a
reduction would be constitutionally suspect, the question may ultimately require
judicial resolution." (Page 2) 1 have attached the Attorney General's Opinion to this
memo.
I certainly agree with all those statements of the Attorney General. This is a
very unclear area of the law with both constitutional and statutory issues that cannot
be fully resolved until the Arkansas Supreme Court .speaks. This is similar to the
situation the City faced with the TIF District and the proper allocation of the tax
increments among the TIF District, School District, City, Library, Pension Funds and
County. Since the proposed division of taxes differed from what I believed was
constitutional, I could (and did) file a declaratory judgment suit at 8:00 A.M. the day
after the City Council approved the TIF Bond Ordinance to prevent an illegal exaction
suit. The Arkansas Supreme Court agreed with my major constitutional argument and
also the argument of the Fayetteville Public Library and ordered the division of taxes
adjusted. This prevented an illegal exaction case with attorney fees potentially in the
millions. Fayetteville had had to pay opposing attorneys' fees that totaled over $5
million in two illegal exaction cases against Fayetteville in the 1990's.
The City of Fayetteville cannot file a declaratory judgment suit in this case
because "the boards of trustees of the respective funds have been vested with the
general power and duty to administer the funds. (Arkansas Attorney General Opinion
No. 2005-041: pages 3-4) The Arkansas Attorney General has opined that a. city
council cannot "exercise any control over the local police or fire pension and relief
fund ... (nor) countermand any financial directives of the board." (Id. at page 3)
Thus, only the Pension Board could seek some judicial relief. However, a
declaratory judgment case (as used in the TIF District case) may not meet the
requirement of a justiciable controversy. Thus, it would be very difficult to get a
court analysis of the right and power to reduce pension benefits without the Pension
Board actually reducing benefits. If benefits were reduced, a pensioner could sue the
Pension Board contesting its right to reduce his or her benefits. Then a Court could
decide if the Pension Board had the right to reduce the benefits. If the Court
determined that pension benefits could not legally or constitutionally be decreased,
then the pensioner suing the Pension Board (and all other pensioners) would be
entitled to the amount of pensions they would be received if pensions had not been
reduced. Fortunately, the Pension Fund would still have sufficient funds to pay all
these benefits, plus an attorney's fee so no Board of Trustees members should be
individually liable.
If the Pension Board does nothing and allows the pension fund to.spend itself
into bankruptcy, a pensioner might sue the Board and claim you breached your
fiduciary duty to preserve the pension fund by reducing benefits. If this suit was
successful, the pension fund would have no assets to pay any judgment against you so
individual board members could be individually liable for the judgment and attorney
fees. Of course, you could win and the Attorney General Opinions could be used to
support your claim of reasonable diligence and good faith decisions.
As the statutory attorney for your pension fund, I still advise you that in my
opinion your primary duty is to do everything you can do to ensure the survival rather
than the bankruptcy of your pension fund. I believe there are strong legal arguments
that a court would agree that you have the legal and constitutional power to reduce
benefits if necessary to keep your pension fund from being bankrupted in the
foreseeable and near future.
Everybody agrees that benefits can (and will) be reduced if your pension fund
spends itself into insolvency (where it is now heading). The Attorney General
believes such proportional reduction of benefits must wait until the year the pension
fund goes broke.. I believe the board of trustees has the statutory power to decrease all
payments to all eligible beneficiaries by an equal proportion and to not allow the
assets .in the fund to become fully depleted if it is clear the pension fund will not be
able to:make full payment to all beneficiaries within a few years.
§24-11-807. Payment amounts; pro rata shares
"(b) Should the fund provided for in this subchapter be
insufficient to make full payment of the amount of
pensions to all persons entitled thereto, then the fund shall
be prorated among those entitled by the proper authorities
as may be deemed just and equitable.
"(d) For the purpose of determining how to prorate benefits,
the proration shall be considered just and equitable if:
"(2) The board of trustees decreases all payments to all
eligible beneficiaries by an equal proportion for the fiscal
year and does not allow the assets in the fund to become
fully depleted." (emphasis added)
CONCLUSION
The Attorney General and I agree that the legal issue of whether the Pension
Board can reduce pension benefits now to prevent the fund's future• insolvency is
unclear and uncertain. I continue to recommend that some action to protect the
pension funds' long term solvency must be taken by the pension board of
trustees. I do not believe the pension boards have the power to increase revenue to
the pension fund, so the only option would be to reduce benefits being paid out of the
fund. Even though reduction of benefits may be successfully challenged in the court
and cost the pension fund some attorney fees, it also may succeed in saving the
pension so no pensioner will be left with no pension in the future.
I will not repeat here my legal analysis expressed in earlier memos, nor am I
likely to prepare numerous future memos to you on this subject. You know what I
recommend. However, I will always be available to answer any questions you may
have in the future.
Opinion No. 2009-102
November 4, 2009
The Honorable Sue Madison
State Senator
573 Rock Cliff Road
Fayetteville, Arkansas 72701-3809
Dear Senator Madison:
I am writing in response to your request for a supplemental opinion as a follow-up
to a previous opinion (Op. Att'y Gen. 2009-049) issued to you regarding the City
of Fayetteville Firemen's Pension and Relief Fund (hereinafter "Fund"). The
question presented in Opinion Op. 2009-049 was whether action by the Fund's
Board of Trustees in reducing benefits to retirees would violate Arkansas
Constitution article 2, section 17, the so-called "Contract Clause," which in
relevant part prohibits the passage of any "law impairing the obligation of
contracts......1 As you know, I concluded that such action "may well constitute an
unconstitutional impairment of the obligation of contract" with respect to benefits
in effect when members' rights became vested. Op. Att'y Gen. 2009-049 at 5.
The answer was less clear regarding a reduction of a benefit increase occurring
after vesting. Id.
The questions addressed in Opinion 2009-049 were asked generally, without
regard to any particular benefit increase or reduction. You have now asked the
following, more pointed question concerning a benefit reduction:
Is there any statutory or constitutional provision that would prohibit
the Firemen's Pension and Relief Fund Board from reducing pension
benefit amounts, which had been previously raised, as long as such
You also asked whether members of the Board and the City "would be exposed to liability should a
lawsuit by filed on behalf of any retiree?" I declined to speculate in response to that question because of
the intensely factual nature of such a claim. Op.Att'y Gen.2009-049 at 7.
The Honorable Sue Madison
State Representative
Opinion No. 2009-102
Page 2
benefits are not reduced below the 50% of ending pay amount
established by A.C.A. § 24-11-818?
You have also presented the following additional question concerning the Board's
Authority:
Does A.C.A. § 24-11-807(d)(2), which states, "The board of trustees
decreases all payments to all eligible beneficiaries by an equal
portion for the fiscal year and does not allow the assets in the fund to
become fully depleted," provide the Board further statutory authority
to decrease benefits to prevent funds depletion?
As background for this second question, you report that the Board "is only
considering reducing benefits to pensioners (which were legally raised to 90% of
ending salary a few years ago) because of actuarial reports showing depletion of
the pension fund within a few years if pensions are not reduced."
RESPONSE
In response to your first question, there is no express statutory prohibition; but as I
have previously suggested, the absence of such a statute may not be determinative
of the Board's authority to effect a reduction. Regarding a possible constitutional
prohibition, while it is my opinion that such a reduction would be constitutionally
suspect, the question may ultimately require judicial resolution. The answer to
your second question is "no," in my opinion.
Question I - Is there any statutory or constitutional provision that would
prohibit the Firemen's Pension and Relief Fund Board from reducing pension
benefit amounts, which had been previously raised, as long as such benefits are
not reduced below the 50% of ending pay amount established by A.C.A. §24-11-
818?
There is no express statute prohibiting a benefit reduction by the Board. In my
opinion,however, the absence of such a statute is not necessarily determinative of
the Board's authority to effect a reduction. As you know, I opined in Op. Att'y
Gen. 2009-049 that "the Board must act within the confines of the statutes in
seeking to reduce benefits[,]" and that a court faced with the constitutional issue
might decide that the Board lacks general authority under the statutes to reduce
benefits. Id. at 6. I explained that in my view, this possibility follows from the
The Honorable Sue Madison
State Representative
Opinion No. 2009-102
Page 3
absence of a statute plainly authorizing a reduction, other than under certain
specified circumstances. Id.
I should nevertheless emphasize the tentative nature of the discussion of this issue
in Opinion 2009-049. I did not opine definitively that the Board cannot reduce
benefits. The statutes are not entirely clear and no court has addressed the matter.
The question in my opinion invites judicial or legislative clarification. It also
bears noting that I am not the Board of Trustees' counsel in this matter. It is my
understanding that local counsel has advised the Board concerning its authority to
reduce benefits under the particular circumstances. The Board may certainly wish
to rely upon that advice,pending clarification of the statutes.
Turning to the constitutional question, I will not entirely restate the substance of
Opinion. 2002-098 regarding the possible impairment of a contractual obligation
contrary to Ark. Const. art. 2, § 17. Instead, to summarize, I concluded generally
that a reduction in benefits that were in effect upon vesting would likely constitute
an unconstitutional impairment of contract, whereas a benefit increase occurring
subsequent to vesting may not give rise to protected contractual rights. You have
now in essence asked whether there would be an unconstitutional impairment if
the reduced benefits remained above the amount established by A.C.A. § 24-11-
818, which provides in relevant part:
Any pension fund member who has served in a fire department in
the State of Arkansas for a period of twenty (20) years or more, the
last five (5) years of which shall have been consecutive, shall be
entitled to be retired and receive from the fund a monthly pension
equal to one-half(1/2) of the salary attached to the rank he or she
held as a volunteer, part-paid, or full-paid member.
A.C.A. § 24-11-818(a) (2) (Repl. 2002).
This is the "50% of ending pay amount" referenced in your question. I will limit
my discussion to those members who will have established "{t]he right to
participate in the fund" prior to a reduction in benefits that had previously been
increased by the Board.Z A.C.A. § 24-11-818(b). Subsection 24-11-818(b) states
in full regarding this right of participation:
Z As noted in Op.2009-049 at 5, benefit increases are authorized under A.C.A.§§24-11-101 — 104(Rept.
2002).
The Honorable Sue Madison
State Representative
Opinion No. 2009-102
Page 4
Any fire fighter who shall have completed the period of service as
provided for in this section shall receive from the board a certificate
showing that he or she has completed the term of service required
and is entitled to participate in all the benefits provided for in this
act upon compliance with, and subject to, all the other terms and
conditions of this act, whether he or she severs his or her
connections or continues in service at the expiration of the time as
set out in subdivision (a)(2) of this section. The right to participate
in the fund shall become a vested right and shall not be lost by the
termination of his or her services with or without cause.
A.C.A. § 24-11-818(b)(Rept 2002 (emphasis added).
In my opinion, the most likely scenario for an "impairment" argument involves a
reduction of benefits that had been increased before this "right to participate"
became "vested." The argument would be that these "vested" members have a
constitutionally-protected contractual right to all benefits under the fund, including
all increases above the 50%of ending pay amount.
I cannot predict with certainty how our court would resolve this claim. In my
opinion, the issue may be framed as follows: Are the benefit increases part of the
terms of the retirement benefit contract that were fixed at the time of retirement?
See 16B Am, Jur. 2d Constitutional Law § 721 (cited in Op. Att'y Gen. 2009-049).
It seems clear that such terms are ascertained by reference to the law as it stood
when the vested members retired. Op. 2009-049 at 4-5. See also Jones v.
Cheney, 253 Ark. 926, 937- 938, 489 S.W.2d 785 (1973). In this regard, the
pension law plainly provided for the benefit increases. See A.C.A. § 24-11-102(a)
(Rept. 2002) (authorizing the board of trustees to "increase benefits for future or
current retired members and beneficiaries....") The increases at issue presumably
were approved in compliance with certain specified conditions, including an
actuarial valuation "reflecting that the level of contributions and other income
under the ... fund is sufficient to amortize the unfunded liabilities resulting from
the benefit increase over a thirty-year period[.]" Benefit increases are thus
apparently funded at least in part through employee contributions. This likely
supports the "impairment" argument that the benefit increases were earned, and
are part of an enforceable contract. See Robinson v. Taylor, 342 Ark. 459,463,
463, 29 S.W.3d 691 (2000 (discussing the holding in Cheney, supra, that a
retirement system based on voluntary contributions from member employees
The Honorable Sue Madison
State Representative
Opinion No. 2009-102
Page 5
"represents delayed compensation for services rendered in the past due under a
contractual obligation....")
This argument might be countered by citing A.C.A. § 24-11-818 (Rept. 2002),
wherein it provides that fire fighters who have complied with the act's terms and
conditions will receive a certificate showing that they are "entitled to participate in
all the benefits provided for in this act...." (Emphasis added.) The original act
establishing the pension fund, Act 491 of 1921, did not include the authority to
approve benefit increases. This authority, found at A.C.A. §§ 24-11-101 — 104,
was instituted by a later enactment, Act 839 of 1979. It might therefore be
contended that benefit increases pursuant to this later enactment are not part of the
pension benefits that members were assured of receiving upon fulfilling the
requirements created by the pension act. See again A.C.A. § 24-11-818.
While this argument has some appeal, 1 believe it may be undermined by noting
that the so-called "vesting" language of section 24-11-818 speaks in terms of a
"right to participate in the fund" which is "not lost by the termination of ...
services...." Id. at (b) (see language set out above). This suggests that the statute
is focused on establishing express requirements for participation in the fund, and is
not concerned with defining the particular benefits when it refers to a "vested
right," i.e., it is not referring to "vesting" in a constitutional sense.
According to my research, this would present a case of first impression for the
court. We know that a contributory plan such as the one at issue gives rise to
"vested" rights for purposes of the Contract Clause. See Cheney, supra. But
judicial clarification will likely be necessary in order to definitively determine
whether the benefit increases at issue are part of these constitutionally protected
rights.
Question 2 -Does A.C.A. §24-11-807(d)(2), which states, "The board of trustees
decreases all payments to all eligible beneficiaries by an equal portion for the
fiscal year and does not allow the assets in the fund to become fully depleted,"
provide the Board further statutory authority to decrease benefits to prevent
funds depletion?
My predecessor addressed a similar question and concluded that this provision,
which authorizes the proration of benefits, applies in the event the pension fund is
unable to pay full benefits in the current fiscal year. Op. Att'y Gen. 2005-041 at
The Honorable Sue Madison
State Representative
Opinion No. 2009-102
Page 6
7-9 (response to Question 4) (copy enclosed). I fully concur, and refer you to the
opinion for the analysis.
Because you have not indicated that the Fund is currently unable to pay benefits, it
is my opinion that the answer to this question is"no."
Deputy Attorney General Elisabeth A. Walker prepared the foregoing opinion,
which I hereby approve.
Sincerely,
DUSTIN McDANIEL
Attorney General
DM:EAW/cyh
Enclosure
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