Missouri Supreme Court’s Decision in Neske Appears to Have Confirmed that Public Employees Have Contractual Rights to Their Pensions, and Governmental Units Must Fund Pensions to Conform with Principals of Actuarial Soundness

Introduction

Following the victory in the Missouri Supreme Court, in March, 2007, the Firemen’s Retirement System of St. Louis (“FRS”) and its Board of Trustees recently received $49.4 Million from the City of St. Louis (“City”). This payment related to the underfunding of FRS by the City of St. Louis for Fiscal Years 2004, 2005, 2006 and 2007.

The History of the Case

Prior to the disputed fiscal years, the City of St. Louis had fully paid the amount certified by the Trustees, based upon the calculations of the Pension Plan’s actuary. Relying upon various legal authorities and reacting to an alleged budget crisis, the City underfunded the Pension Plans, and provided funding based upon a percentage of payroll unrelated to the actuary’s calculations (i.e., 401(k)-like contributions were made for this defined benefit plan).

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Public Employee Pension Funds

Firemen’s Retirement System v. St. Louis.

Lead counsel, Dan Tobben, assisted by colleague David R. Bohm, represent the Firemen’s Retirement System of St. Louis (FRS) in several lawsuits against the city of St. Louis and the Board of Estimate and Apportionment concerning the city’s failure to fully fund FRS.

On June 17, 2005, the Honorable David L. Dowd entered judgment in favor of FRS in the amount of $6,834,947 for fiscal year 2004. A declaratory judgment was entered, as part of the same judgment, mandating the city pay an additional $11,710,276 for fiscal year 2005.

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