Committee approves merger amendment option for Kenner firefighters; city to accelerate payoff under chosen option

The Public Retirement Actuary Committee on Aug. 19 accepted a merger-amendment calculation for the City of Kenner’s 1999 entry into the Firefighters Retirement System and approved the option favored by the city, under which Kenner would keep its agreed payments but accelerate payoff of the related obligation (shorten the amortization), rather than reduce its payments. The committee adopted the motion without objection.

Background: The Kenner merger dates to 1999. Subsequent litigation determined certain incentive pay should have been included in retirement calculations for affected firefighters; that led to a settlement and to a recalculation of the merger amounts. Firefighters Retirement System and the city reached an agreement to have the actuary (as presented to PERSAC) compute an amendment to the original merger that would affect how much of the obligation could be funded from insurance premium tax allocations under state law.

Actuarial calculation and proposed credit: The actuary presented an interest-adjusted calculation of the insurance-premium-tax-funded portion of the merger and a letter to the firefighters' board with a numeric figure (presented in the report text as 43,541,597). The actuary told the committee that, had the merger been structured with the higher salary reporting originally, insurance-premium taxes would have been responsible for a somewhat larger share. Under the merger rules discussed, up to 40% of active liabilities for a merger can be funded by insurance premium taxes with the municipality responsible for the remainder; retired and terminated members’ costs remained the municipality’s responsibility.

Impacts and legal/financial mechanics: The actuary cautioned that shifting this insurance-premium-tax credit to Kenner would reduce allocations to the other systems that share insurance-premium tax distributions (municipal police and sheriffs), but said the effect would be immaterial to those plans’ employer rates and valuation results. He recommended carrying the merger amortization forward over the remainder of the original 30-year schedule rather than extending a new long amortization. The letter to the board offered three options; the City of Kenner indicated a preference for the third option (accelerated payoff while not reducing the agreed payments).

Formal action: Senator Joseph Price moved to accept option three (Kenner elects not to reduce its agreed payments but to pay off the debt earlier); Ms. Johnson seconded. The motion was adopted with no objection.

Notes and next steps: The actuary said the adjustment will be reflected in the upcoming FRS valuation and that staff can provide more precise allocations and quantification of the downstream impact on municipal police and sheriffs upon request. The firefighters’ board had already accepted the actuary’s calculations and requested PERSAC consideration.