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Legislative mistake could gut Mont. pension fix

Mistake could gut Mont. Legislature's proposed pension fix shortly after it goes into effect

Associated Press

HELENA, Mont. (AP) -- A retirement board was told Tuesday that a mistake in the Montana Legislature's proposed pension fix for public employees could undo plans to balance the system in less than 30 years.

The Public Employees Retirement Board is being asked to modify a rule in order to avoid a glitch that could leave the state's beleaguered pension system facing a huge shortfall.

Lawmakers struggled mightily to agree earlier this year on pension system fixes that rely on contribution increases and a cut to inflationary increases. Democrats barely pushed the legislation through amid a desire by many Republicans to end the various pension plans.

But lawmakers and others say the pension fix for public employees is now in trouble. They say the fix for the teachers' retirement system did not include the same mistake, and is unaffected.

Gov. Steve Bullock's office asked the Public Employees Retirement Board to modify plans for actuaries to analyze the impact of cutting inflationary increases for retirees. The board says it believes the move is legally required.

But the move is expected to show the system would balance in 30 years — and activate a trigger showing that employer and employee contribution increases are no longer needed.

Lawmakers argue those increases were supposed to stay in place much longer — especially since the courts could also remove the fix's cut to inflationary increases as unconstitutional.

The governor's office asked a board subcommittee Tuesday to alter its actuarial valuation to take into account the likelihood a lawsuit from retirees will remove the portion of the fix that reduces inflationary increases. That would leave the increased contributions in place.

The panel said the full board would meet next week to consider the move — even though it worries the panel faces liability itself if it departs from law and generally accepted standards.

"Unfortunately, the Legislature did not make some of the changes that were requested by our staff prior to the session's close. It is my understanding they were forewarned of these issues," said PERB chairman Terry Smith. "This board can't violate our actuary standard of practice to come up with a result that the Legislature thinks was their intent to happen."

Bullock budget director Dan Villa said the board should alter its plan in order to buy time until the technical error could be fixed during the 2015 Legislature.

Villa pointed out that the administration's original legislation did not include the fix.

But Republican state Rep. Rob Cook, attending the meeting, interjected that the technical error was included in an amendment to the bill sought by the administration.

Cook said that the worst case scenario is that the timing of events throws out the increased contributions and the courts later throw out the inflationary increases — leaving the system again facing big shortfalls.

He said Bullock and other Democrats aren't likely to get support again from majority Republicans for a future fix. Many in the GOP are seeking to replace the pensions system with a less lucrative defined contribution plan similar to what is more common in the private sector.

"I don't think the board understands how serious the issue is," Cook said. "The public employees could end up with a defined contribution plan."

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