Texas AG Shoots Down Plan to Shore Up Fort Worth Retirement Fund

April 11, 2008 (PLANSPONSOR.com) - An opinion issued Tuesday by the Texas Attorney General's office said part of the plan to fix the shortfall in Fort Worth's retirement fund is unconstitutional.

According to the Fort Worth Star-Telegram, a large part of the pension fund’s shortfall came from employees spiking their pensions by working lots of overtime or taking promotions in their last few years before retirement, increasing salary amounts used to calculate pension payments. In order to address the fund’s $410 million shortfall, city officials and members of the pension board put a plan in place that limits the increases in an employee’s base salary during those years.

However, according to Attorney General Greg Abbott’s opinion, the Texas Constitution says cities cannot limit pension benefits that employees have already earned, the news report said. Therefore, the salary cap cannot be applied to employees who have already worked for the city long enough to be vested in their pensions.

Assistant City Manager Karen Montgomery said in the news report it is unclear whether the opinion applies to imposing the limit on newly hired employees or those not yet fully vested in their pension benefits. State Representative Phil King, a former Fort Worth police officer, requested the opinion.

Other provisions of the city’s plan to address the fund’s shortfall are still in place, including a change to the calculation of cost-of-living benefits and an increase in city contributions to the fund.