2017-06-14 / Front Page

Schools’ SRP payment short by another $1 million


Even after allocating an additional $3.1 million in the fiscal year 2018 budget to its financially troubled supplemental retirement plan, the Chesterfield school system still expects to be more than $1 million shy of its required annual payment to the plan’s trust fund.

Chris Sorensen, Chesterfield County Public Schools’ assistant superintendent for finance, briefed the other members of the SRP administrative committee last week about the projected funding shortfall.

School officials won’t know for sure until they receive a report from their actuary, Sorensen said, but they are “pretty confident” they will have to make a payment of $14.3 million to the SRP trust fund in September.

More than half of that amount – approximately $7.6 million – will be generated through salary savings as veteran employees enter retirement later this month and are replaced by younger, cheaper workers.

Another $2.5 million in SRP funding has been included in the school system’s budget for the past several years.

After it was alerted last year to a massive unfunded liability in the employee benefit plan, the School Board directed an additional $3.1 million to the SRP trust fund for the fiscal year that begins July 1. That means the school system will have about $13.2 million available to transfer to the trust fund – approximately $1.1 million less than it likely will have to pay out in annual benefits to employees participating in the plan.

It’s not yet known where that money will come from. The school system most likely will cover the shortfall by tapping into its year-end operating surplus.

“We might be short on payments [to the SRP trust fund] the next two or three years,” said Sorensen, who serves as chairman of the administrative committee that met for the first time last month.

That’s because a large number of highly paid central office administrators retired last year – following the departure of Superintendent Marcus Newsome – and enrolled in the SRP.

Even though 315 school employees will retire June 30, the salary savings realized from their departures won’t be enough to offset the larger-than-usual annual payments to SRP participants.

Allan Carmody, the county’s finance director and a member of the six-person administrative committee, said the funding shortfall will be eliminated once those administrators collect their final

SRP payments four years from now.

“It won’t be a recurring event,” he added.

The school system’s SRP has been significantly underfunded since at least 2010, when an efficiency review by MGT of America pegged the plan’s unfunded liability at $59 million.

By 2013, the plan’s funding gap had swelled to approximately $70 million. Amid continuing budget concerns, the School Board decided it could no longer offer the benefit to any employee hired after July 1 of that year.

In April, with the unfunded liability at $99 million, the Board of Supervisors stepped in and exercised its legal authority to amend the plan’s terms.

While the board maintained the SRP benefit level at 175 percent of an eligible employee’s final salary, it extended the minimum payout period from five to seven years. It also established a salary cap under which only the first $95,000 of an employee’s salary counts toward the benefit calculation.

The board also changed some of the service-time provisions for SRP eligibility and limited participation in the plan to a maximum of 175 employees annually.

A total of 129 employees are currently slated to enter the SRP this year, but they have until June 30 to rescind their applications.

As amended by the Board of Supervisors, the schools’ SRP now contains structural provisions designed to increase oversight and guarantee that required annual contributions are made to the plan’s trust fund to preserve its long-term solvency.

One of those measures is the creation of an administrative committee to closely monitor the plan’s funded ratio, assess the performance of the trust fund’s investment portfolio and confirm that required audits and actuarial reports are completed in a timely manner.

The Board of Supervisors also approved a budget resolution in April authorizing the county administrator to withhold appropriations to the school system until it makes the annual required payment to the SRP trust fund every September.

Sorensen said last week that the school system will know the exact amount of that payment by the time the administrative committee meets again in August.

Board of Supervisors Chairwoman Dorothy Jaeckle called the projected $1.1 million shortfall “tolerable.”

“The SRP plan is not designed for the savings and expenses to match every year,” she said. ¦

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