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Published July 23 2012

Fargo, city workers both will increase pension contributions

FARGO – City workers here and their employer will pay more to the city’s three employee pension programs in hopes of stabilizing them by 2032.

For the past nine months, Fargo officials have educated themselves on the city’s pension plans to find a solution to fix the plans’ financial shortfalls.

Fargo’s dilemma with its fire, police and general employee pension funds is not unlike budget issues other cities have faced due to underperforming retirement investments after the economic downturn a few years ago.

Officials began phasing out the general employee fund in 2009, in favor of the statewide pension program, but the fund still needs to remain viable while employees are participating in the plan.

Under the plan adopted Monday evening, workers will increase their own contributions by 1 percent for the next two years. The city share of contributions will also increase, rising by 5 percent through 2018.

Those additional funds, plus other changes in the pensions’ administration, should put the pension funds back above water within 20 years.

“Promises have already been made, the benefits have already been earned, so what we’re dealing with is pension debt,” said Mark Meyer, the actuary who advises Fargo’s pension funds. “This is a long time in the future, but the dynamic is for a long-term benefit that will be paid for in advance.”

Meyer said Fargo’s pension challenges are far less severe than other cities nationwide that have filed bankruptcy because those cities’ contributions were far too low for the benefits that were being paid out.

Fargo leaders hope to avoid such an outcome by taking action now.

“The goal is sustainability for the employees and the taxpayers,” Fargo Commissioner Mike Williams said.

“We’ve done a nice job correcting things that needed to be corrected,” said Commissioner Tim Mahoney, calling the plan “sound financial policy.”

Continuing on a plan that was set forth last year, Fargo commissioners also agreed to add more funds into the police and fire pensions this year as a short-term buffer.

In 2011, city officials fronted $1 million to the general employee pension funds in order to cushion the account. For 2012, commissioners agreed to add $600,000 to the fire pension fund and $1 million to the police pension fund.

Former Fargo Commissioner Dave Piepkorn proposed last year that the city’s pension funds ought to be transitioned into a 401(k)-style plan that would take the investment risk off city taxpayers. That proposal was not part of the final recommendations adopted Monday by city leaders.

Piepkorn’s term expired at the end of June after he lost his re-election bid.


Readers can reach Forum reporter Kristen Daum at (701) 241-5541