Missouri Judge OKs Defined Contribution Pension Plan for Local Firefighters

Published November 1, 2007

The Mehlville, Missouri Fire Protection District (MFPD) board of trustees won a victory for fiscal responsibility when a judge ruled the district may switch employee retirement benefits from a defined benefit to a defined contribution plan.

The August 27 ruling by St. Louis County Circuit Court Judge Thea A. Sherry struck down a lawsuit by the local firefighters union challenging the MFPD’s decision to terminate its defined benefit plan and put every employee, current and future, in a defined contribution plan.

It was the first legal challenge of its kind in Missouri. Other entities have made the switch from defined benefit to defined contribution plans for their employees, but none had been challenged in court.

Important Precedent

The ruling sets a precedent for government bodies that hope to reduce pension costs and give employees more control over and flexibility in their retirement programs.

“The court is not persuaded that there was credible evidence that the directors breached their fiduciary duty by modifying the retirement/pension plan under the facts presented to the court,” Judge Sherry wrote in her ruling.

The MFPD board decided to make the change after Bonnie Stegman and I were elected to the three-member commission in 2005. We decided to run for the board because of the abuse of taxpayers the prior board had been inflicting. The district’s defined pension/disability plan provides an example.

Huge Payouts

MFPD employees were retiring with 100 percent taxpayer-funded lump sum pension payouts in excess of $750,000. The board also was allowing abuse of the disability plan. One MFPD firefighter received more than $430,000 in disability payments from the district while employed at another fire district!

All the while, the plans’ unfunded liability grew to more than $5.8 million.

After ousting two union-backed incumbents, Bonnie and I went to work to reform the pension and disability plan. We hired a disability insurance provider to take over the disability portion, and after two years of union-filed lawsuits against that move, the change became final earlier this year when the Missouri Supreme Court declined to hear the case.

We then voted to change the defined benefit pension plan to a defined contribution plan. We did this to bring financial stability to the district and the taxpayers who fund it.

Firefighters sued over that change, culminating 17 months later in Judge Sherry’s ruling in the board’s favor. However, the union could appeal the ruling.

‘Coming Storm’

There is no doubt that public pension excesses and underfunding of pensions are the coming storm in state and local government, yet few elected officials are doing anything more than giving lip service to the issue.

The largest reason is the powerful lobby and political influence of public-sector unions. As union influence in the private sector wanes, public-sector unions are flourishing and using their muscle to elect union-friendly legislators and board members.

As Bonnie and I have seen, they will go to almost any length to keep their claim on the public trough.

Aaron Hilmer ([email protected]) is chairman of the board of directors of the Mehlville Fire Protection District in south suburban St. Louis, Missouri. The district provides fire and medical services to more than 110,000 people and has a tax base of more than $2.5 billion of assessed property.