Wednesday, November 29, 2023
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LCG Files Lawsuit Against MERS

FOR IMMEDIATE RELEASE

March 21, 2023

LAFAYETTE CONSOLIDATED GOVERNMENT FILES SUIT AGAINST MUNICIPAL EMPLOYEES’ RETIREMENT SYSTEM OF LOUISIANA

Lafayette, LA – Lafayette Consolidated Government (LCG) has filed a lawsuit requesting a Declaratory Judgment against the Municipal Employees’ Retirement System of Louisiana (MERS). The basis for the suit stems from MERS’ recent demand in the amount $14,787,012 for unfunded accrued liability (UAL). According to an independent actuary, MERS is incorrectly calculating the UAL. LCG maintains MERS’ calculation is grossly inaccurate and requests the court review and declare a correct calculation of any amount that may be owed by LCG to MERS.

In 2010, LCG moved new employees from the Parochial Employees’ Retirement System of Louisiana (PERS) to MERS. Since that time, MERS’ rates have increased significantly, causing LCG’s contribution requirements to more than double. For the benefit of employees and taxpayers, LCG again changed retirement systems for new employees back to PERS beginning November 1, 2020. Employees who were hired before this date remained members of MERS. Both moves in 2010 and in 2020 required successful legislative action.

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The legislation passed in 2020 (Louisiana ACT 298) defines when LCG owes for retirees’ UAL. As such, LCG acknowledges financial responsibility for the UAL for retirees and has made payments totaling more than $2.9m in good faith since the legislation passed.

However, this matter was escalated last week when the MERS Board of Trustees requested that the State Treasurer or any department or agency of the State withhold funds from LCG as payment for the incorrect UAL amount. LCG officials maintain they have been working in good faith with MERS to agree on the correct amount owed for retirees, and the move to ask the Treasurer came as a surprise.

Chief Administrative Officer Cydra Wingerter said, “During the past two years, we have worked through the list of employees submitted by MERS. We have both been able to agree on who should be properly included and the correct UAL due. In many cases, the agreed upon list was significantly less than the amount initially claimed by MERS.”

In an effort to fairly solve this matter, LCG is requesting the court intervene with a declaratory judgment to set the amount that is due and the correct method of calculating UAL going forward.

LCG acknowledges its financial responsibility for its retirees’ UAL as dictated in ACT 298. According to City-Parish Attorney Greg Logan, “MERS is taking an aggressive position based on incorrect application of the statutes and normally accepted actuarial methods. We have an obligation to pay the appropriate actuarial UAL for certain employees up to the day they separated from service.” Logan continued, “However, MERS is seeking UAL on employees that should not be included; and therefore, their calculations are wrong as they are based on the wrong assumptions.”

LCG maintains it has paid for vested members. “MERS is failing to take into account the companion statute, and they are attempting to saddle LCG with MERS costs not owed by LCG,” Logan stated.

According to LCG’s retirement records, a substantial number of non-vested employees withdrew their employee contribution upon leaving LCG’s employment. Under this circumstance, MERS retains the employer contributions and the earnings and experiences no UAL as a result because the employee surrenders their future returns or benefits.

“Two-thirds of the former employees MERS is claiming left LCG before vesting and redeemed their contributions, meaning MERS has an actuarial gain, to which LCG is entitled a credit,” said Wingerter. Per LCG’s independent actuary, MERS is using the wrong entry age normal – a tax approved methodology for calculation as stipulated by ACT 298. Further, MERS is incorrectly claiming vacant positions. “They claim that when an employee leaves and LCG fills a position, LCG owes not just the UAL for the person when they left, but also the projected normal costs for everybody that’s ever filled that position,” Logan concluded.

In March of 2020, both City and Parish Councils unanimously passed an ordinance allowing for new employees to join PERS. As required in that local ordinance, the Councils have been provided regular, timely updates as necessary on the UAL payments to MERS totaling $2,925,804.13.

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