10/04/2016
Missouri State Auditor Nicole Galloway today issued an audit of a retirement plan for employees of the City of Bridgeton, located in St. Louis County. The defined benefit plan is closed to employees hired or rehired on or after January 1, 2012, but still covers city employees hired prior to that time. Auditors raised concerns about the plan's financial condition in a 2014 report and conducted this year's in-depth review to offer recommendations to increase oversight and accountability of the plan.
"For hard-working men and women who spent years of their lives working with the promise of a retirement plan, it's difficult to imagine that in the years after retirement they might not have the resources they expected, and were promised, because of the city's poor financial decisions," Auditor Galloway said. "The consequences of underfunding the plan have real world impacts and these concerns must not be ignored."
Auditors determined economic challenges that impacted investments around the country were compounded in the Bridgeton retirement plan by poor management and oversight by the city council.
The report shows the plan is only funded at two-thirds of the required amount with unfunded liabilities of nearly $14 million in 2015, largely due to inadequate contributions from the city and returns on investments that were lower than city officials had assumed. The city council, which serves as the plan's trustee, also had not developed key funding and investment policies to guide officials or the contracted investment manager in making plan-related decisions. Auditors recommended corrective action to increase councilmembers' oversight of the plan and to provide training on the council's responsibilities in managing the plan.
The audit also raised concerns with the city's finance commission. The commission serves in an advisory capacity and is responsible for plan oversight, but did not meet one time between the years 2012 and 2014. In addition, city officials made little effort to share information on the plan's financial condition with employees and retirees who would be directly impacted.
Although city officials have made some attempts to make positive changes in managing the plan, they are not yet making full contributions, and it is not yet clear how recent adjustments may affect the plan's long-term financial condition.
The plan's financial condition also impacts citizens who aren't vested in the retirement plan by contributing to a credit downgrading last year by Moody's Investor Services, which makes it harder for the city to get favorable terms on future debt issuances like bonds.
As of 2015, the plan covered approximately 120 retirees and other beneficiaries, with an additional 130 current and former employees eligible to receive benefits through the plan in future years. Employees who started working for the city beginning in 2012 are enrolled in a different retirement plan. The new plan is a defined contribution plan, where members pay into the retirement system.
The audit, which received an overall rating of "poor," can be found online here.
