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Lewis & Clark County to appeal possible $5M charge from state retirement system

Posted at 7:28 PM, Jan 02, 2020
and last updated 2020-01-02 21:41:02-05

HELENA — Lewis and Clark County leaders say they will appeal a decision by the state’s public employee retirement system, asking them to make a payment of up to several million dollars to cover an unfunded liability.

County commissioners discussed their next steps at their meeting Thursday. They have 90 days to make a formal response to an Oct. 15 letter from the Montana Public Employee Retirement Administration, or MPERA.

Commissioners told county staff to draft a letter to the MPERA board, asking them to reconsider the decision to ask for the payment.
The issue stems from PureView Health Center’s upcoming separation from the county. Last year, the Lewis and Clark County Commission approved a plan to make PureView an independent nonprofit by the end of February.

PureView currently employs more than 60 people. Like other county employees, they are currently part of the Public Employees’ Retirement System, which MPERA administers. Employees and the county both make contributions toward their future pension benefits. However, once PureView becomes independent, its employees will no longer be eligible for the PERS.

MPERA executive director Dore Schwinden said that large number of employees leaving the system creates a significant unfunded liability. He argued it will put an unfair additional burden on the other agencies that are part of the system, unless the county covers that liability.

In the October letter, Schwinden pointed to a provision in the Montana Constitution, added by public vote in 1994, that requires the boards of public retirement funds to ensure they are administered “on an actuarially sound basis.”

In an accounting form, Lewis and Clark County identified about $5.1 million in projected net pension liability related to PureView employees. MPERA asked the county to provide employment data on current and former PureView staff, so their own actuaries can calculate the precise amount of that liability.

County leaders have been sharply critical of MPERA’s request for payment. On Thursday, commissioners argued their decision was not legally justified.

“This is new; it’s out of left field,” said Commissioner Andy Hunthausen. “It’s not based on any law; it’s not based on any rule.”

Commissioners said county legal staff believed MPERA only has the authority to demand this type of payment if an entire contracting agency chooses to leave the system, not when only some county employees are leaving the system. They argued the separation of PureView should be treated as a “reduction in force,” as when a county lays off employees.

“We don’t know going forward what this means,” said Hunthausen. “When we lay off five employees, does that trigger it? Or does it trigger it when we lay off 50 employees? They haven’t defined any of that.”

Schwinden told MTN that MPERA takes its decisions based on reports from its actuaries, who determine whether a change like PureView’s separation will have a significant impact on retirement funds.

MPERA has recently identified several other counties that have taken or are considering changes that they argue will cause significant impacts. Schwinden said they have sent a demand letter for around $3 million to Cascade County over their 2018 separation from their community health center, now known as Alluvion Health. He said they also informed Toole County leaders that, if they sell the Marias Medical Center in Shelby to a private owner, MPERA will request liability payments from them.

Lewis and Clark County must send its response letter to MPERA by the end of next week. The MPERA board will then make an initial decision. If it rules against the county, they could pursue further appeals.

Commissioners made clear Thursday that they do not believe MPERA’s request is justified, and they intend to continue fighting against it.

“Why MPERA picked PERS, Lewis and Clark County and two other counties to pick this fight is beyond me,” said Commissioner Jim McCormick. “It has to be addressed now, and we have to get this settled.”