Officials Grapple with Unfunded Liability for Non-Classified School Employees

Town of Coventry officials met Tuesday to determine who is responsible for an unfunded liability of $24,209,279 applied toward pension benefits for non-classified employees in Coventry public schools.

Town manager Thomas Hoover, along with Town Council President Gary Cote, Town Council member Kerry McGee and Finance Director Theodore Przybyla, are now grappling with what they say might be a long-term issue, but with only a few weeks to resolve it.

The town’s independent auditor and Przybyla met with the state auditor general on Monday.

The next day, a letter from Acting State Auditor General, Dennis Hoyle, said, in part:…"we believe the Town and the School Department should immediately seek to obtain clarification of the issues surrounding sponsorship of the pension plan. …"

The state has now granted an additional extension and deadline of Feb. 15 for Coventry to submit audited financial statements for the fiscal year June 30, 2011 to January 31, 2011.

“We have been making contributions equivalent to 12.75% of wages and employees are supposed to provide 8%,’ said Hoover of the Coventry School Employees Pension Plan.

"That showed up every year in our audit. But it was not enough to meet the benefits that were being provided out of this fund. That is not a liability we have shown before.”

An employee pension plan for school employees was first established in 1977. There also have been further amendments since then, while a trust and a four-member board to administer the trust for the pension plan were established a few years ago.

"Before the audit is completed and the annual town budget meeting can be held,” said Hoover, "we need to know who’s responsible for this fund.”

Hoover said there was also a meeting last week between town officials, the Board of Trustees, School Superintendent and School Department Business Manager to convey the urgency of the underfunded liability.

“We feel it is the school union’s responsibility to get a legal opinion on this matter,’ said McGee.

"We believe we are paying the right amount every year,” said Hoover of the town. “But there is ambiguity as to what the fund is," said Hoover. "Is it a defined contribution or a defined benefit?”

"If it is the town’s responsibility, then it increases our unfunded liability and our annual required contribution (ARC) will likely increase. It should have been clarified before now,” Hoover noted.

"This amount of $24 million is in addition to the $62 million of unfunded liability between municipal and fire departments,’ said Cote. “Depending on what the state might do and if they impose a 4% tax cap, we just might have enough to cover the ARC payment. But that does not take into consideration any additional new costs or changes to contracts that might be made."

On Monday, Feb. 6, officials from the town of Coventry, state and school Department are scheduled to meet to continue discussions to help resolve the matter before the deadline. The meeting will be held at at 6 p.m. and the public is welcome.