John Keane | Pension360

Florida to 19 Local Pension Plans: Fix Funding Issues Now

Nineteen of Florida’s most underfunded local pension plans received “call to action” letters from the state Tuesday, calling for the systems to immediately begin formulating a plan to deal with their funding issues.

From the Florida Times-Union:

The 19 pension plans all are less than 50 percent funded, prompting the terse letter from the Department of Management Services, the state agency tasked with reviewing local pensions.

DMS Secretary Chad Poppell sent letters to Jacksonville Police and Fire Pension Fund executive director John Keane and Raymond Ferngren, administrator of the Jacksonville Corrections Officers’ Pension Fund and the Jacksonville General Employees’ Disability Fund. The Alachua School Board Early Retirement Plan and Ocala General Employees’ Retirement System also received letters, and Jacksonville Chief Financial Officer Ronald Belton was copied.

The letter to Keane pointed to the Police and Fire Pension’s $1.6 billion unfunded liability and said current funding was only enough to pay 37.3 cents of every dollar owned to retirees and current employees.

“As a result, your plan should consider taking action to prevent future taxpayers from having to incur costs,” Poppell wrote.

Coincidentally, Poppell serviced as Jacksonville’s chief of human resources under Jacksonville Mayor John Peyton.

The Police and Fire Pension letter also mentions ongoing discussions with city officials to reform the pension, saying they “are not yet realized.”

“The Department of Management Services requests you immediately notify all active and retired members of the plan regarding the plan’s conditions and what actions will be taken to improve it,” it said.

It’s unclear whether the funds will have any punishment if they don’t comply with the letter’s demands.

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Jacksonville Council President Latest to Support State Investigation of Public Safety Pension System

Florida Rep. Janet Adkins last month sent a letter to Gov. Rick Scott calling for an investigation into “impropriety…questionable practices and possible mismanagement” of Jacksonville’s Police and Fire Pension fund.

Specifically, Adkins wanted an investigation into how the fund administered its DROP accounts, and whether they ignored regulations and city auditors.

Shortly thereafter, city Councilman Bill Gulliford sent a letter supporting the idea of an investigation.

On Tuesday, council President Clay Yarborough threw his support behind the investigation.

From the Florida Times-Union:

Jacksonville City Council President Clay Yarborough sent a letter on Tuesday to Gov. Rick Scott supporting a state investigation into the Jacksonville Police and Fire Pension Fund.

In his letter, Yarborough said he stands with state Rep. Janet Adkins, who asked Scott in December for the state’s chief inspector general and the Florida Department of Law Enforcement to conduct a “review and investigation” of the pension fund.

“The Jacksonville City Council recognizes and appreciates the sacrifice and dedication of all public safety personnel,” Yarborough said. “That withstanding, Representative Adkins prudently identified … that restoration of public confidence in the management of the pensions is imperative. This is in the best interest of taxpayers and employees alike.”

The focus of the potential investigation:

The city’s attorneys and the pension fund have disagreed in recent years over several issues, including the creation of a special pension plan for senior staff members, including its longtime executive director, John Keane.

Despite city attorneys saying the pension fund lacked the authority to create the special pension plan, the fund’s own attorneys said they disagreed. As of now, Keane’s special pension plan is fully funded and is set to pay him benefits when he retires.

Adkins, R-Fernandina Beach, has asked Scott to investigate the special pension plan, as well as determine whether state rules and laws were followed in regard to the creation, management and regulation of Deferred Retirement Option Program accounts.

In October, the Times-Union reported how the pension fund ignored findings by the City Council Auditor’s Office and city lawyers that the pension fund incorrectly applied regulations for participation in DROP. The paper found that three individuals who entered DROP will collectively receive about $1.8 million more than they would have under strict interpretation of the code.

The Governor’s Office has remained mum on whether it will begin an investigation.

Photo by TaxRebate.org.uk

Florida Fund Seeks Audit After Newspaper Reports On Officials Skirting DROP Payout Rules

Over the past few weeks, the Florida Times-Union has run a series of articles detailing how high-ranking public safety workers, and top pension officials, were able to rack up benefits by staying in the Jacksonville Police and Fire Pension Fund’s (JPFPF) DROP program for longer than rules allowed.

The articles have now gotten the attention of the JPFPF – the fund says it will hire an auditor to look into the allegations.

From the Florida Times-Union:

The head of Jacksonville Police and Fire Pension Fund said he will ask his board to hire an independent firm to review the fund’s practices and determine if the fund has been too lenient when it comes to senior members’ participation in the lucrative Deferred Retirement Option Program.

Pension executive director John Keane announced his decision in a four-page statement sent to City Council that takes issue with a Florida Times-Union investigation, “Too Much of a Good Thing.”

The Oct. 19 story exposed how, under strict interpretation of city code, at least three high-ranking police officers and firefighters with strong ties to Keane were able to skirt the rules and participate in the DROP program for too long, or even altogether, piling up excess pension benefits totaling $1.8 million.

The pension fund’s desire for an audit of its own comes as some city leaders are suggesting the fund be subjected to a forensic audit, which typically investigates whether there are grounds for criminal charges.

Details of the DROP program and the city code that employees may have breached:

The DROP allows police officers and firefighters to continue drawing a regular salary while at the same time having a pension placed into a special account for up to five years.

DROP calculations are based on math.

The number of years one works for either the police department of fire department determines the value of one’s first year of pension payments into DROP. Years of service also determine how long one may participate in DROP.

The code says once a member of the pension fund has worked 30 years, he or she is able to participate in the DROP for three years. Those falling into that category are entitled to 80 percent of the average salary they earned over the previous two years. Those with less than 30 years of service may participate for the full five years, but the percentage of their first year’s pension would be less. For instance, someone with 20 years would get a first-year pension that is 60 percent. That percent grows by two percentage points per work year. So someone with 29 years of service would get 78 percent.

The system is set up so one doesn’t get the best of both perks.

But some people did.

Bobby Deal, a retired police officer and long-time chairman of the pension fund’s board of trustees, and Richard Lundy, a retired firefighter and business partner of Keane and Deal, started their DROP participation after they hit the 30-year mark. And instead of participating for three years, they were allowed to remain in the DROP for the full five years.

Because the city does not currently require that a retiree cash out his or her DROP earnings upon retiring, the norm in states that offer DROP, including the Florida Retirement System, these DROP accounts are being re-invested in the pension fund and are guaranteed to grow 8.4 percent regardless of the true market value of the stock market.

Deal and Lundy now stand to make $1.3 million in questionable benefits on top of their regular pensions.

Read the previous Florida-Times Union investigations here.