Nacogdoches County Hospital District tells PRB it faces large unfunded liabilities and Medicaid recoupments exceeding $2.8 million

Officials from the Nacogdoches County Hospital District (NCHD) told the Pension Review Board they are conducting multiple reviews and working with legal counsel and actuaries to address significant unfunded liabilities for the hospital district’s retirement plan.

Rhonda McCabe, chief executive officer, told the PRB the district has held six board and retirement-committee meetings since the board’s December 4 session and on Feb. 21 submitted materials responding to PRB questions and earlier staff inquiries. McCabe said the district’s materials explained the retirement committee’s new members and the committee’s processes for reviewing plan options.

McCabe said the district’s legal review concluded that plan documents designate the plan administrator as a fiduciary, and that ERISA duties do not apply to this plan. She also told the PRB that the plan’s written terms allow benefits to be paid only from trust assets, permit contribution termination, and permit plan dissolution by district resolution; the district said those provisions are consistent with the Texas Constitution and with the plan documents.

McCabe told the PRB the district is awaiting updated actuarial information and has not yet decided whether it will use public funds to address unfunded liabilities. She said the district is discussing the matter with third-party service providers and the retirement committee, and any formal actions will be reported back to the PRB through staff.

McCabe and other district representatives also described a series of state Medicaid supplemental-payment recoupments that the district said have added a material cash flow strain: “recent demands for Medicaid supplemental payment recoupments by the state of Texas amounting to over $2,800,000. This is in addition to $7,000,000 already owed for prior recoupments,” McCabe said.

PRB members questioned NCHD representatives about earlier lump-sum distributions that took place after the district sold operations to a private operator, and whether those distributions would need to be addressed if the board were to terminate the plan. NCHD representatives said they had not yet discussed recouping past lump-sum payments in the event of a termination but said they would consider that question if termination became operative.

PRB members also asked whether the district had authority to restart or levy property taxes or otherwise raise recurring local revenue to address the liability. A district board member said the district has statutory authority to impose property tax and is exploring options, but cautioned that restarting a tax could require additional steps and that revenue from a restarted property tax would take time to generate.

Questions from PRB members also focused on who makes investment decisions for the fund, the role of the board as fiduciary, the frequency of board meetings, the district’s contract with its administrator (Principal) and actuary, and whether Principal had been used as an investment consultant. District representatives said Principal provides quarterly and annual statements and participates in investment discussion, that the board is the ultimate decision maker for investments, and that the newly formed retirement committee intends to hold a meeting with the actuary, Principal and other parties to develop a plan.

District representatives asked for continued cooperation with the PRB as they work toward solutions. The PRB encouraged the district to provide requested actuarial updates and to clarify any proposed funding sources as those options are developed.

The PRB did not take a formal vote on a course of action during this meeting.