LITTLE ROCK — A little-known retirement system for just over a dozen Arkansas Supreme Court employees has caught the attention of some state lawmakers who say they were surprised to learn about it a few weeks ago.
The directors of the state’s two largest retirement systems said they didn’t know about this tiny system, either.
But it turns out that the actuary for the system for these court employees also is the actuary for the Legislature’s Joint Committee on Public Retirement and Social Security Programs.
The little-known system is called the Bar of Arkansas Employees Pension Plan.
It is financed through license fees paid by attorneys.
And the system’s 14 members work for the Supreme Court Office of Professional Conduct, Office of Professional Programs, the Arkansas Lawyers’ Assistance Program, and Ar- kansas Access to Justice Commission.
These members include Stark Ligon, whose salary as executive director of the Office of Professional Conduct is $140,453 a year, and Christopher Thomas, whose salary as director of the Office of Professional Programs is $123,268, according to information provided by the court.
“We have our own private retirement plan over here,” said Ligon, who is a member of an investment review committee for the retirement plan.
The system’s assets were valued at $1.242 million and the system’s unfunded liabilities totaled $455,976 as of July 1, according to a report from system actuary Osborn, Carreiro & Associates Inc. The unfunded liabilities are the amount by which the system’s liabilities outstrip the value of the system’s assets.
About 55 percent of the system’s investments were in bonds and 45 percent were in stocks as of Dec. 31, according to a system report from Bank of the Ozarks.
“The philosophy is to be as close to APERS’ plan as possible,” said Ligon.
APERS is the Arkansas Public Employees Retirement System.
One difference is that the members of the Bar of Arkansas Employees Pension Plan aren’t required to contribute any money into the system, while the public employees system requires new members of the system hired after July 1, 2005, to pay 5 percent of their salaries into the system.
Another difference is the rate charged to employers.
The actuary for the bar employees plan projected the employer rate financed out of fees paid by lawyers for fiscal 2013 at the equivalent of 18.5 percent of employee payroll. The public employees retirement system plans to charge state and local governments financed through taxpayers the equivalent of 14.24 percent of employee payroll in fiscal 2013.
A co-chairman of the Legislature’s retirement committee, Sen. Johnny Key, R-Mountain Home, said he learned about this small retirement system in the fiscal session before he proposed an unsuccessful plan that said Arkansas’ chief justice has discretion to use a fund made up of fees paid by attorneys to supplement funds for trial court administrative assistants’ salaries in fiscal 2013.
He said auditors with the Legislative Audit Division have been reviewing the retirement system as part of their regular audit of the state Supreme Court and he wants to obtain more information about the system.
“With term limits, I don’t know if there is anybody left that remembers anything about it, when it was established and any of the prior discussion,” said Key.
Former state Sen. Steve Faris, D-Central, who is a former cochairman of the Legislature’s retirement and personnel panels, and has been critical of the Supreme Court at times, said it is puzzling to him how this retirement system could exist.
“I was in the Legislature for 14 years [until 2011] and never knew it existed,” said Faris, who now serves on the Arkansas Lottery Commission and was an aide to Senate President Pro Tempore Paul Bookout, DJonesboro, for the 2011 and 2012 legislative sessions.
Senate Democratic leader Robert Thompson of Paragould, who is an attorney, said he had mistakenly assumed that these employees were part of the Arkansas Public Employees Retirement System or the Arkansas Judicial Retirement System, and that they were state employees.
The state Supreme Court has generally assumed broad powers governing attorneys under Amendment 28 of the Arkansas Constitution, he said.
Senate Republican Whip Michael Lamoureux, who is co-chairman of the Legislature’s Personnel Subcommittee and an attorney, said he thought these employees were state employees.
“I don’t necessarily think it is wrong,” he said.
Amendment 28 of the Arkansas Constitution states, “The Supreme Court shall make rules regulating the practice of law and the professional conduct of attorneys at law.”
Arkansas’ voters approved the measure by a margin of 74,290 to 46,932 on Nov. 8, 1938, according to the secretary of state’s office.
Article 16, Section 4 of the Arkansas Constitution states, “The General Assembly shall fix the salaries and fees of all officers in the State; ... and the number and salaries of the clerks and employees of the different departments of the State shall be fixed by law.”
Gov. Mike Beebe, a former attorney general and a former co-chairman of the Legislature’s personnel panel, said last week that the employees who are part of the Bar of Arkansas Employee Pension Plan “don’t belong to us” and aren’t state employees and get no taxpayer money.
“They get paid by license fees for lawyers separate and apart that the Supreme Court and the Professional Conduct Committee, I guess, runs outside of state government,” he said. “Administration of law. Third branch of government.”
J.D. Gingerich, director of the Administrative Office of the Courts, told a legislative committee during the fiscal session that lawmakers have previously determined that the fees paid by lawyers “are not and should not be appropriated funds.”
“My impression ... is that it is the fact that Amendment 28 assigns this specific responsibility, in effect the regulation of a private practice to the Supreme Court of Arkansas, and so they treat that as a unique and separate function,” he said. “They don’t use one cent of this money for any state purpose. It is used for the regulation of the practice of law, as suggested to them by the Bar of Arkansas.”
In a letter addressed “To whom it may concern” and dated Dec. 4, 2000, then-Chief Justice W.H. “Dub” Arnold said the letter confirms that the Supreme Court has adopted the Bar of Arkansas Employees Pension Plan and Trust Agreement, and appointed Leslie Steen, the court’s clerk, as the plan administrator.
“Pursuant to Amendment 28 of the Arkansas Constitution of the State of Arkansas, the Arkansas Supreme Court regulates the practice of law,” according to Arnold’s letter. “In carrying out that responsibility, the Supreme Court employs individuals to conduct various administrative responsibilities.”
The salaries of these employees and all office expenses are funded by a series of accounts and investments known generically as the Bar of Arkansas, Arnold said, and the Supreme Court has exclusive authority over the accounts and directs all contributions and distributions from those accounts.
All funds in the Bar of Arkansas accounts are derived from various fees assessed by the court and paid by licensed Arkansas attorneys, according to Arnold’s letter.
The high court’s action came after a February 2000 report on Arkansas’ lawyer regulation system — sponsored by the American Bar Association Standing Committee on Professional Discipline — urged the court, among other things, to remedy the fact that the executive director of the Office of Professional Conduct and its staff weren’t provided with any retirement benefits back then.
“The team understands that efforts are underway to do so,” the report to the court said. “These are skilled professionals who should be treated as such in terms of compensation. Further, the lack of retirement plan may make it difficult in the future to hire and retain qualified counsel and support staff.”
Gingerich told a legislative committee that “the members of the court ... had actually come to the leadership of the legislative retirement committees requesting that they consider the possibility of adding these people, non state employees, to state retirement and that was turned down.
“So, we had a class of employees working in the same building, some of which were covered by state retirement and these folks who weren’t, and so the state bar as well as the American Bar Association petitioned the court asking the court to create a retirement system to cover for these employees and that was the reason for the court’s action,” he said.
In a per curiam order dated Nov. 1, 2001, in which license fees for attorneys were increased for several purposes, the Supreme Court said that it followed the recommendation of the American Bar Association in 2000 and instituted a retirement program for employees of the Office of Professional Conduct and Office of Professional Programs.
“To insure that the program is actuarially sound, it is necessary that sufficient resources exist in the bar account to make the required contributions to the program. The increase in license fees will permit such contributions,” the court said in its order.
A subsequent article in this newspaper reported that the fee increases will, among other things, ensure that the retirement program for the staff of the Office of Professional Conduct and Office of Professional Programs is actuarially sound.
Gingerich said last week that he was not personally involved in either drafting proposed legislation to make these employees part of a state retirement system or working on the legislation, “so I can’t help with details of what happened or why.
“My only memory is that they were not successful,” he said.
Asked last week about the creation of the retirement system for these employees and discussions with lawmakers about making them part of a state retirement system, Arnold said, “ I am sorry. I don’t recall.”
In 1997, then-state Rep. Olin Cook, D-Russellville, introduced House Bill 1341 to allow the state Supreme Court to allow employees in the Office of Professional Conduct or the Office of Professional Programs, who have been denied retirement coverage because the person was or is paid from the Bar Account of the Supreme Court of Arkansas instead of funds appropriated by the public employer, to become a member of the Arkansas Public Employees Retirement System.
The legislation died in the Legislature’s retirement committee, according to the General Assembly’s website.
Cook said in a recent interview that, “I don’t remember that bill at all. I was new to the Legislature and new to the retirement [committee].”
George Hopkins, who is a former co-chairman of the retirement committee who served in that position in 1997 and is now director of the Arkansas Teacher Retirement System, said last week that he doesn’t recall Cook’s bill, “so that pretty much tells me that that wasn’t brought to me.
“I would be confident that a bill like that would not have been defeated at the committee level,” he said.
Hopkins, an attorney, said he doesn’t recall talking to anybody about the creation of a retirement system for certain employees of the state Supreme Court before leaving the state Senate on Dec. 31, 2000.
“I gained my knowledge about this retirement system from your call,” he told a reporter last week.
Gail Stone, director of the Arkansas Public Employees Retirement System, said in a recent interview that “I don’t know anything about this” retirement system for certain state Supreme Court employees.
She said she became the system’s deputy director in 1998 and the 1999 session was her first one before she became director in 2001.
The Bar of Arkansas Employees Pension Plan’s retirement benefits appear to be similar to those of the public employees retirement system, she said, and their death and disability benefits are generally similar.
The Bar of Arkansas Employees Pension Plan’s plan to charge an employer rate of 18.5 percent of employee payroll to the bar “seems reasonable” because it’s a relatively new retirement program that needs to be funded rapidly and assumes a 7 percent annual investment return, she said.
Stone said the public employees retirement system’s employer rate would be close to the bar employees plan’s rate if the public employees system assumed a 7 percent annual investment return. The public employees system assumes an 8 percent annual return, she said
Jody Carreiro, a partner in the Osborn, Carreiro & Associates Inc. actuarial firm that works for the Legislature, said his firm has told the Bureau of Legislative Research that the firm works for the Bar of Arkansas Employees Pension Plan.
But he added, “Everybody forgets about this. It may be that legislators forgot about this separate plan.”
Front Section, Pages 1 on 03/25/2012