Caddo Parish Commission said it will do whatthe district court directs in an upcoming rulingabout the constitutionality of its members' retirement benefits.
In a November 2015 letter to the state legislative auditor, Parish Commission Administrator Woody Wilson said the parish commission will comply with the judicial determination of the First Judicial District Courton whether more than $255,000 in contributions to the Caddo Parish Employee Retirement System, or CPERS, were out of line.
"When management learned of this issue, we opened an inquiry seeking an authoritative resolution," Wilson wrote in the letter. "Once a final judgment is rendered, we will comply with the finding of the court regarding the legality of the ordinance in question."
Wilson'sresponse followed a 2015 review of CPERS by state Legislative Auditor Daryl Purpera, whose report found that contributionof public monies to commissioners' retirement accounts after 1997 was"improper" and“appears to be unconstitutional.”
Ordinances passed in 2000 and 2005 allowed Caddo Parish commissioners to participate in the Caddo Parish Employees Retirement System, or CPERS. But the Louisiana Home Charter Rule states that part-time city and parish employees are not eligible to participate in public retirement systems supported by taxpayer dollars.
RELATED: Caddo Parish commissioners vote to oust themselves from CPERS
In CPERS, participants decide how much money they will contribute each year to their accounts. The parish then places a discretionary percentage into a 401 (a) account, which is 100 percent publicly funded by the parish.
Caddo Parish taxpayershave paid more than $255,000 to the potentially illegal retirement benefits over the past decade—$136,000 more than taxpayers would have paid had the commissioners participated "properly" in a Social Security system, according to the auditor's report.
Earlier in the year, parish commissioners voted to discontinue participation in CPERS. The parish is not able to offer comment on pending litigation, so the Times is using excerpts from the public records documents sent to the legislative auditor following the review in 2015.
In addition to questioning the constitutionality of CPERS, the auditor reports thatstronger controls are needed over the program and that the commission may need to recover the excess taxpayer funds paid over the years.
MORE: Lawsuit demands commissioners return money taken from taxpayers
Questions of constitutionality
The Louisiana Constitution and Home Rule Charter state that publicly elected officials who are part-time employees cannot participate in a public retirement system supported by taxpayer dollars.
Yet commissioners, who are by definition part-time employees of the parish, received more than $18,000 of taxpayer dollars into their 401 (a) retirement accounts in 2015 alone.
“It is within the purview of the Legislative Auditor’s authority to advise on the proper use of public money,” Purpera wrote in a February 2015 letter to Wilson. “I urge you to reconsider your position.”
In their response letter, the parish cited a 1999 legislative amendment that allows “unclassified employees” to take part in retirement benefits. The parish also cited that the state constitution and charter only prohibit contributions to a “defined benefit plan”— or a retirement plan in which individuals receive a promised pension.
CPERS is a “defined contribution plan”— a retirement plan in which a certain amount of money is set aside each year by a company based on— and as such, it is not in violation of either the state constitution or charter, the parish response said.
In a later correspondence, Purpera said the amendment “did not alter the mandate of the Louisiana constitution,” that previous opinions from the Attorney General prohibit the parish from “adopting an ordinance which is inconsistent with the constitution” and that the technical difference between the types of retirement plans was of “no consequence.”
“Regardless of how a plan works, or is defined, the Legislative Auditor maintains that the constitution provides that these public officials cannot be a member of a state of Louisiana, or any political subdivision, sponsored retirement plan that contributes public funds to their retirement,” Purpera wrote.
In a letter dated Nov. 2, 2015, Wilson responded that the commission had decided to seek a judicial determination to resolve “the conflict between the ordinance and state law.”
Oral arguments for the lawsuit are scheduled for Jan. 11 at 9:30 a.m. in First Judicial District Court.
Issues of controls over CPERS
The legislative auditor report from 2015 revealed that Caddo Parish had contributed $258,665.78 of illegal “donations” into CPERS 401 retirement accounts.
That review also cited that the parish did not have a “complete audit trail” and that “it was not clear which plan documents have governed CPERS since inception.”
“There were no written procedures for how the contribution schedule is established during the parish’s annual budget process, nor were there procedures that detailed how the Parish’s contribution percentages are determined,” Purpera wrote.
In a 2015 response to that claim, the parish deferred again to the pending court ruling.
“Once a final court ruling is received establishing the legality of Commissioners’ participation in CPERS, the parish will take the necessary steps to formally update and adopt a comprehensive CPERS plan that complies with all applicable federal and state legal requirements,” the parish response read.
The 2014 review also included a number of recommendations for the commission— including to cease enrolling commissioners and contributing additional money into CPERS, to start a dialogue with the Social Security administration and the IRS for guidance on how to recover the improper contributions paid into the retirement accounts. Purpera also encouraged commission management should be able to provide “complete, consistent, properly executed and up-to-date” documentation of contributions into the public retirement system.
The parish's response?
“Caddo Parish understands the importance of having adequate internal controls over the management of CPERS,” Wilson wrote.
A Timeline of events
July 28, 1993: Caddo Parish adopted an ordinance authorizing commissioners and unclassified employees to make retirement contributions to parish’s deferred compensation program in lieu of Parochial Employees’ Retirement Systems (PERS)’ defined benefit plan.
1997: PERS sued Caddo Parish. The court ruled the ordinance was unconstitutional because membership in PERS was mandatory.
1999: Revised statutes made PERS optional for unclassified employees but did not alter the Louisiana Constitution.
April 1, 2000. Ordinance 3762 allows retirement benefits for unclassified employees. Any unclassified employee not in the CPERS program must become a member of PERS or the Social Security System.
July 8, 2015: A judgment is rendered in response to Caddo Parish’s “Petition for Declaratory Judgment.” The state’s Peremptory Exception of No Cause of Action is granted.
Aug. 24, 2015: The judgment in Caddo Parish v. State of Louisiana is signed. The parish has 15 days to amend its petition to state cause of action or dismissed.
February, 2015: Legislative Auditor Daryl Purpera looks into allegations that CPERS is unconstitutional and concludes contribution of public funds into commissioners’ retirement accounts seems “improper.”
March, 2015: Shreveport resident Elliot Stonecipher files a separate suit against the Caddo Parish Commission related to CPERS and other potentially illegal benefits.
Nov. 2, 2015: Caddo Parish administrator Woodrow Wilson responds to the Legislative Auditor, who he says “conducted a thorough review in a professional manner” and that the parish has opened an “inquiry seeking an authoritative resolution” through a “judicial determination.”
January, 2017: Proposed hearings for pending litigation related to CPERS
BY THE NUMBERS (rounded to the nearest dollar)
$255,786 taxpayer contributions to CPERS between 2006 and 2015
$36,036 taxpayer contributions to CPERS in2014
$34,752 taxpayer contributions to CPERS in2013
$30,737 taxpayer contributions to CPERS in2012
$30,478 taxpayer contributions to CPERS in2010
$29,661 taxpayer contributions to CPERS in 2011
$23,438 taxpayer contributions to CPERS in2009
$22, 347 taxpayer contributions to CPERS in2008
$18,545 taxpayer contributions to CPERS in 2015
$17,505 taxpayer contributions to CPERS in 2007
$12,288 taxpayer contributions to CPERS in 2006
Source: Caddo Parish Commission public information, Louisiana Legislative Auditor reports
