A letter from the Executive Director of the State Retirement Agency to county elected officials describes the Agency’s reasons for the method of its recent pension liability calculation for local governments.
A recent letter from the Executive Director of the State Retirement Agency, Dean Kenderdine, shares the Agency’s basis and manner for a recent pension liability calculation. The letter was sent to chief elected officials in counties that participate in the state pension system.
The liability calculation apportions the unfunded liability of the state pension system among its members, which include some county governments. The calculation comes following a federal rule requiring county government members of the state pension system to report their share of the liability on their own financial statements. GASB (the Governmental Accounting Standards Board) is the source of the federal rule.
MACo has raised questions surrounding the liability calculation on behalf of the fourteen county governments that are members and former members of the municipal pool in the state pension system. The essential concern is that the State’s allocations spread the total unfunded liability of the State System among participants, instead of separating out the municipal pool (which is not as poorly funded as the state pool).
In the letter, Executive Director Kenderdine describes the Agency’s reasoning for its calculation method. On the subject of separating the municipal pool, he states,
The question has been raised as to why the State liabilities and the participating governmental units’ liabilities aren’t segregated for this GASB calculation purpose. After all, each year when the System’s actuary determines the contribution rates that determine the dollars needed from each participating government, those dollars go into a separate pool for those governments.
The answer is entirely due the fact that, as stated above, the System’s assets are not, and never have been, audited at the plan (Employees’ and LEOPS) level. It is not possible to audit the plan’s assets since inception. Without such audit records, it would be impossible for the State’s auditor, and subsequently each participating government’s auditor, to give either entity’s financial statements, an unmodified opinion.
For more information, read one of the letters from State Retirement Agency to county elected officials in Queen Anne’s County.