The Montana Public Employees’ Retirement Administration has issued notice to Cascade County that the county must pay an estimated $3.1 million to cover unfunded pension liabilities for the county employees that split with Alluvion Health last year.

In a November letter to County Commissioners, MPERA Executive Director Dore Schwinden wrote that when the Community Health Care Center, now known as Alluvion, split from the county “and the county terminated its payment of actuarially required contributions on behalf of CHCC,” the county left an unfunded actuarial accrued pension liability of about $3.125 million in the systems defined benefit plan.
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“This funding lapse of the county has resulted in this constitutionally mandated actuarial review of contributions tied to CHCC staff. If it is left unpaid, this amount will cause PERS pension obligations tied to CHCC to no longer be funded on an actuarially sound basis as required by the Montana Constitution and a disproportionate share of this liability will be paid for by all remaining state, county and local governmental entities participating in PERS. This will require taxpayers outside of Cascade County to be potentially burdened with future tax bill costs to pay for Cascade County’s unfunded PERS pension costs in order to prevent actuarial unsoundness” the the defined benefit plan, according to the letter.
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Schwinden wrote that it was a final administrative decision that Cascade County could appeal in writing within 90 days.
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MPERA has also warned of an estimated $5 million penalty against Lewis and Clark County as it’s community health care center, PureView, prepares to split from the county this year.
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Lewis and Clark County has been vocal in opposing the penalty and has submitted a formal appeal to MPERA and requested public meetings to discuss the issue.

Cascade County Attorney Josh Racki told The Electric last week that his office was drafting a letter to MPERA objecting to the penalty. He said the county was working with Lewis and Clark County as well as the Montana Association of Counties to fight the penalty.
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Racki said the issue would likely end up in court.

Schwinden told The Electric in the fall that his office had also notified Toole County of a potential penalty as it considers privatizing the Marias Medical Center in Shelby.

“They can’t walk away from a bill and spread it from all these other employers,” Schwinden said in an interview with The Electric.
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He said it hadn’t been a common issue in Montana, but there had been a small business improvement district that separated from a government entity and they negotiated payments over several years to cover their unfunded liability.

In Lewis and Clark, county officials said they’d spoken with MPERA about the PureView split earlier in the process and the unfunded liability penalty wasn’t raised, according to articles in the Helena Independent Record.

Schwinden said in an interview with The Electric that similar medical centers have been privatizing nationwide in recent years and he said that in every instance, the courts have ruled they must pay the pension liabilities.

In Kentucky, the state retirement system and a mental health service provider have been locked in a legal battle for more than six years over pension liabilities. The provider had been a state entity that morphed to a nonprofit and attempted to not pay the pension liability when it declared bankruptcy. In August, the Kentucky Supreme Court ruled the provider had a statutory obligation to pay the pension liability.

In 2014, a district court judge ruled that the City of Colorado Springs had to pay the Colorado Public Employees’ Retirement Association the employer portion of the pension liability for employees as a public hospital privatized, according to the Gazette.

Schwinden told The Electric that “we have a constitutional requirement to get that net pension system paid off.”

He said the MPERA system only contracts with public entities and serves counties so Cascade County would have the contractual obligation to cover the pension liability, but encouraged the county and Alluvion to have discussions over who would pay the $3.1 million.