Mehlville fire district board votes to change pension plan; legal challenge looms

By MIKE ANTHONY

“See you in court.”

That’s what an attorney representing Local 1889 of the International Association of Fire Fighters told the Mehlville Fire Protection District Board of Directors last week just minutes after the board voted to change the district’s pension plan from a defined benefit plan to a defined contribution plan.

“What’s new?” board Treasurer Bonnie Stegman said in reply to Local 1889 attorney John Goffstein’s comment.

In separate votes, the Board of Directors voted 2-1 March 16 to adopt an amendment and two resolutions changing the district’s pension plan from a defined benefit plan to a defined contribution plan.

Stegman and board Chairman Aaron Hilmer voted in favor of the motions. Board Secretary Dan Ottoline Sr. was opposed.

The board’s action terminates the defined benefit plan on March 31 and starts a new defined contribution plan on April 1. Employees can make additional contributions to a supplemental deferred compensation pension plan. Both plans will be administered by the American United Life Insurance Co.

Monthly benefits provided to current retirees will not be affected by the changes.

Effective April 1, the district will contribute a percentage of an employee’s total compensation to the defined contribution plan. The fire district’s contribution will be based on years of service. Employees with less than 15 years of service will receive 8 percent; 15 to 19 years, 9 percent; 20 to 24 years, 10 percent; and 25 or more years, 11 percent.

Hilmer had urged Pension Committee members March 9 to propose alternatives to the 8-percent to 11-percent contribution rates, but Pension Committee member Dan Rosenthal told the board last week they wanted to stay with the existing plan.

Ottoline said he didn’t see a need for a change, noting that Mike Zweiner of Milliman, an actuarial firm, told the committee March 9 that the pension plan was 100 percent funded.

“… Why do we need to change?” he said. “Bonnie, you said you hated to see your father lose his pension, why are you fooling with these men?”

Stegman said, “I’m not fooling with it. I’m trying to make it so that they have it. It is 100 percent funded right now at this point in time, but down the road it’s not going to be. There’s going to be a shortfall of $5.5 million.”

Ottoline interjected, “Have you got a crystal ball?”

Stegman said, “This is the best time right now to change this plan because they’ll get every cent — pretty close to every cent — that they have vested up to this point. If we fool around and wait and it’s not funded, they’re not going to get anything.”

Ottoline later said, “Right now it’s 100 percent funded. Why change it? If, in fact, down the road if something happens, yeah, then we can change it. But right now, there’s no need to change it.”

Local 1889 filed a lawsuit against the district’s three board members in late June, asking the court to prohibit the board from implementing a disability benefit contract with Standard Insurance and eliminating current disability benefits from the district’s existing pension plan. St. Louis County Circuit Court Judge Barbara Crancer granted a preliminary injunction in early August prohibiting enactment of the proposed changes to the district’s disability plan.

On Feb. 24, Crancer granted the board’s motion for a summary judgment, dissolving the preliminary injunction and dismissing Local 1889’s suit. But Goffstein’s firm since has filed motions asking Crancer to set aside her ruling granting the board’s motion for summary judgment.

Goffstein told the Call that he questions the board’s ability to terminate the existing pension plan. Even if the board has the authority to change the plan, the board must follow strict guidelines, which he alleges have not been followed.

“All those issues right now are before the court. So it’s under submission as we speak,” he said.

Goffstein also contends that the district, in its motion for summary judgment, did not address all the issues raised in the union’s suit, particularly with regard to termination of the plan. Another issue is the contribution rates approved by the board for the new defined contribution plan, he said.

“There’s a serious issue in the amount that they’re putting in there. They’re putting 8 percent in there, the actuaries tell them they could put 16 percent in there. Well, that’s the people’s money,” he said. “That’s one of the issues we’ve raised. I mean that’s a conversion of assets.”

Asked why the employee members of the Pension Committee didn’t suggest a 16-percent contribution rate, Goffstein said, “They could still do that, but they’re presuming that whatever has been done has happened incorrectly. In other words, they’re saying you can’t switch to a defined contribution plan … They took the position that they didn’t want to dignify the termination of the plan at this point until it’s been determined that they can do so.

“For example, let’s just say for the sake of argument, that they can do it. I’m not agreeing that they can, but we say for them to do it, they have to be free of common-law fiduciary breach and to be free from common-law fiduciary breach, they have to do everything right in the means and manner of the operation of the plan. For example, you have to follow correct actuarial advice. They failed to do that. B — they have to follow fiduciary standards in the selection of their service providers. They failed to do that …,” he said.

But Attorney Mathew Hoffman, who represents the fire district, said he believes all issues raised in Local 1889’s lawsuit have been addressed and the judge’s order dismissing the suit was properly granted.

Furthermore, he said the board followed the procedures of the pension plan and state law with the action it took last week.

“The plan documents have been reviewed by special pension advisers and the district’s actuary, and every effort has been made to follow the steps laid out in the documents and as set out by state law,” he said.

As for the motions submitted by Goffstein’s firm, Hoffman said, “The court has taken the plaintiffs’ post-order motions under consideration and we expect to hear from the judge within the next several days.”

Hilmer told the Call he believes the change to the pension plan is one of the promises he and Stegman made to voters.

“Unfortunately, it took many more months to accomplish than what I wanted, but on Thursday night (March 16) Mrs. Stegman and myself fulfilled the last major campaign promise we gave to voters, and that was to reform the pension plan. And on Thursday night, the board voted to do that,” he said. “This process took a long time to come to fruition and during it, I extended my offers to the employees, i.e., the pension advisory committee, to bring us suggestions, to bring us alternatives to the ideas that I had proposed. On Thursday evening after being given months of time to bring us something, all they brought me was nothing and then told us: ‘We’ll see you in court.’ The board passed the new pension plan and if it goes to court, we have a very capable and able legal team and they’ll deal with it. But it’s really out of our hands from here.”