A new financial study says Alabama's retirement plan for county circuit clerks is underfunded and doesn't function like a normal pension plan.
The study by Cavanaugh Macdonald Consulting of Kennesaw, Ga., said the fund for circuit clerks has nearly $11 million in assets, but that is only 15 percent of what it needs to meet its future liabilities.
The state court system provides the bulk of the money each year to pay benefits, and the retirement program operates primarily as a pay-as-you-go system rather than working off investments, the study said.
David Bronner, CEO of the Retirement Systems of Alabama, helps administer the program and commissioned the actuarial report because he was concerned about its finances. The state's budget problems prohibit the court system from contributing enough money to put the program on sound financial footing, and the best solution might be for the Legislature to fold the program into the state pension system for public employees, Bronner said.
The program is the result of a provision in Alabama's constitution prohibiting a retirement plan for many elected officials. The state circumvented that by creating "supernumerary" positions. Those were positions that elected officials assumed when they left office, and they received monthly compensation because they could presumably be called back to work at their old jobs.
"That was a bogus deal to avoid the constitution," Bronner said.
Many supernumerary positions have been discontinued over the past 40 years, and the elected officials have been made part of Alabama's regular pension program. The officials pay part of their salaries into the program, and their county governments also contribute money. Then the officials get a regular monthly pension when they retire, much like the employees who worked in their offices.
Despite the change, the supernumerary fund for circuit clerks remains. And despite the supernumerary title, federal accounting regulations now classify it as a defined benefit retirement plan.
Clerks contribute 6 percent of their salary into the supernumerary fund. The average annual pay for a clerk is about $87,000, according to the study.
After 23 years of service, clerks can leave office and draw 75 percent of the pay. They can also get benefits with fewer years of service depending on their age. When a supernumerary clerks dies, the spouse can draw up to 30 percent of the pay, depending on how many years the clerk spent in office.
In 2011, Alabama's 67 supernumerary circuit clerks received $4.2 million, and the 12 surviving spouses got $379,453. The court system provided more than $4 million of that, and the supernumerary fund the remainder, according to the Retirement Systems of Alabama.
Bronner suggested the Legislature could fold existing circuit clerks into the state pension program under the same plan that covers their office employees. That means the clerks would have to start contributing 7.5 percent of their salaries toward pension benefits rather than 6 percent.
Bronner suggested those already retired on supernumerary status be continued until the program slowly phases out as the participants expire.
If there is no interest in that, "I would like to have this unfunded program transferred back to the courts to administer," he said in a letter to Alabama's chief justice, who oversees the court system statewide.
Pickens County Circuit Clerk Bobby Cowart, president of the Alabama Circuit Clerks Association, said he had not seen the financial report and could not comment.
Chief Justice Chuck Malone said when he got the actuarial report last month, he was already forming a commission to look at the entire court system. It will make recommendations before the end of the year.
Malone leaves office in January, and what happens to those recommendations may depend on the next chief justice elected in November.
Chambers County Circuit Clerk Charles Story, immediate past president of the Circuit Clerks Association, has a keen interest in what happens.
"I hope they are not going to mess with it," he said. "I'm going to retire in January."