The Raytown Times response to Police Chief Lynch’s Letter to the Editor

Recently Police Chief Lynch submitted a letter to RaytownOnline.com. It met our standards and was published. In some ways it was cryptic, as it was in response to an article in the Raytown Times, that was not published on RaytownOnline.com.  The Raytown Times has given permission to reprint their piece on the matter of the Raytown Police Pension Fund. 

Raytown is indebted to the Police Pension Fund to the tune of $7.5 million and it could be 20 to 30 years, or more, before that debt is retired, depending on market fluctuations.

A third party hired by the Police Pension Board indicated the fund would have to show a 20 percent return annually to be fully funded, leading city officials to believe that the fund could no longer be sustained. Police Chief Jim Lynch disagreed with that assumption, holding that stock market gains would grow assets and require less contribution from the city.

In January 2014 the Board of Aldermen moved all current sworn officers of the police department into the Missouri Local Government Employees Retirement System (LAGERS) with other city employees. Officers who were vested with at least 10 years of service at the time of the change will continue to draw part of their pensions from the Police Pension Fund and part from LAGERS. The change will have no affect on retired officers, or widows, already drawing pensions.

The Police Pension Fund has been in existence since 1966. The city’s contribution to the fund grew through the years and remained 100 percent funded until 2000. The unfunded liability grew from about $74,000 in 2000 to more than 3.3 million in 2005. It ballooned to $7.5 million by 2014. In that six-year period, 2000-2005, the city ‘s contribution to the fund rose from $110,000 annually, or 6.7 percent of payroll, to nearly $420,000, or 17.8 percent of payroll. By December 2010 the city’s contribution to the pension fund grew to $747,643, or 25.1 percent of payroll, and city officials became worried about its sustainability.

Police officers contributed 3 percent of their pay to the pension fund up until 1999. The Board of Aldermen ended the practice that year, prompted by new rules from the Internal Revenue Service that prevented pension funds from piling up surpluses.

In 2004, a study showed that Raytown police salaries were the lowest of all surrounding departments and a 5.5 percent salary adjustment was enacted. For the next six years the salaries were raised annually by 5.5 percent, thus annually increasing the city’s contribution to police pensions. Those increases put the department into a competitive position among suburban departments.

There is discrepancy in how those raises were enacted, however. Lynch maintains the pay plan was approved by the Board of Aldermen in 2004. Approval by the city could not be found in city records.

The stock market collapse in 2008 immediately reduced the pension fund assets by $1.5 million, thus increasing the city’s contributions even more. Facing a budget bind, the city froze all city employee salaries in 2009, bringing an end to the annual 5.5 percent increases for police. All employees received a 3 percent increase in November 20 14, the first since the recession hit.

Normal retirement for police officers is 55 years of age with 20 years of service. The police department provided the Times a spread sheet showing a range of retiree pensions and the percentages of their pay at the time of retirement. Pension amounts range from $14,376 annually (22 percent of final compensation) to $79,800 (112 percent of final compensation). The lowest was a patrolman who retired early at the age of 46; the highest was a sergeant who worked nine years beyond his retirement age of 55. Pension benefits grow substantially when officers work over 20 years and past the age of 55.

In summary, city leaders felt strongly that the Police Pension Fund could not be sustained while police officials believed it could with improving market conditions. The two sides finally agreed to move police officers to the LAGERS plan, but philosophical differences between the two remain. It is important to realize that during the period from 2000 to 2014, the political landscape changed with new administrators and new elected leaders. All were factors in creating “The Perfect Storm” of controversy over the Police Pension Fund.