Auditor says trust fund is a problem E-mail
Written by Mark Nichols   

With pension funds under a full-scale attack by powerful special-interest groups, setting up a trust fund to protect police pensions seems like a good idea.
Unfortunately, a Minnesota State auditor says a Minneapolis police pension funds efforts to create a $10 million trust fund is likely illegal. According to State Auditor Rebecca Otto, the proposal before the Minneapolis police pension board to set aside $10 million before the police pension fund merges with a state fund will face legal hurdles.

Otto told reporters with the Minneapolis Star Tribune that this year's law to merge the pension funds requires all of the Minneapolis fund's assets to be shifted to the state Dec. 30.

The proposal from a pension fund board member to set aside the $10 million was designed to cover future costs from a five-year-old lawsuit with the city over benefits.

The State Legislature approved the 2011 merger of the police fund and the state fund at the request of the city, which faces skyrocketing costs to maintain police pensions.

The city says withholding $10 million in a trust fund would reduce the savings for the city the merger was intended to produce.

Mary Most Vanek, the state fund's executive director, said she agreed with Otto and that the proposal has chances best described as slim to none.

She pointed out that a trust isn't needed because the new law gives the state fund the power to pay any bills owed by the police fund.

"It's not necessary, nor do I think it's allowed," Most Vanek told reporters.

Police fund board President Larry Ward said that he was aware of the fact that the proposal could pose problems and pension board attorneys were still working on the details.

Setting up the fund could be a steep, uphill battle, as similar plans have failed in the past. The Minneapolis Teachers Retirement Association tried to set up a trust in 2006, weeks before it merged into the state teachers fund, when fund managers set aside $1.5 million for various expenses.

Then-auditor Patricia Anderson issued a scathing report a few months later. Shortly after that a judge revoked the trust. The Star Tribune has reported that four employees of the soon-to-be-defunct Minneapolis police and fire pension funds will leave their jobs with at least $400,000 in severance benefits.

All four of those employees are expected to seek jobs with the statewide pension plan that is "absorbing" their organizations.

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