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Cement Plant retirement fund in shambles

PIERRE -- South Dakota has a public pension plan with some very severe financial problems.

No, it's not the biggie known as the South Dakota Retirement System, which has more than 70,000 members and 400-plus government units involved.

It's the much-smaller Cement Plant Retirement Fund. It has just 340 members, who haven't been contributing to the fund since the 2000 sale and 2001 transfer of the state-owned business to a company from Mexico.

The retirement fund however remained the responsibility of the old state commission that supervised the management of the business. The Legislature shifted the fund's administration in 2010 to SDRS.

What SDRS administrators and their actuarial consultants have found is a mess. The fund was once believed to be financially solvent, but its investments suffered during the past decade.

Earlier this year the Legislature put $1 million of cash into the fund with the support of Gov. Dennis Daugaard. On Tuesday the governor recommended that $2 million be put in the fund in 2013.

Information presented Wednesday to the SDRS trustees shows the fund's long-term liabilities are currently valued at $61.7 million and its assets have a market value of $47.6 million.

Those numbers don't reflect the $2 million proposed by Daugaard.

The current gap of $14 million is expected to grow to $27 million without additional infusions of cash or investment growth above an assumed 6.75 percent annual rate.

Closing the gap will require 15 annual payments of $1.5 million

The SDRS trustees voted Wednesday to adopt a position that the unfunded liability should be reduced.

State Investment Officer Matt Clark, who sits on the SDRS board, said there needs to be at least $1.4 million provided.

"It clearly would be irresponsible to not do that, in my mind," he said. "It would be nice to get more than $2 million."

What happens to the fund, including any further contributions of state money, will be up to the Legislature.

Jason Dilges, the governor's commissioner of finance, also sits on the SDRS board. He cautioned other trustees and officials to expect difficult questions from legislators.

"The $2 million is nothing more than a starting point for a conversation," Dilges said.

SDRS Administrator Rob Wylie said his answer to legislators will be straight-forward: SDRS is only in its second year of overseeing the cement plant system, and the actuarial analysis presented Wednesday was the first deep look that's been done.