February 13, 2012
The first meeting of the Board of Trustees of the District Attorneys' Retirement System (DARS) was held on August 8, 1956, with the following persons present constituting a quorum: Mr. Fred Jackson (2nd Judicial District), Mr. Sam Wells (8th Judicial District), Mr. Charles Riddle (12th Judicial District), Mr. St. Clair Favrot (19th Judicial District). The early meetings were held at the Audubon Building in New Orleans. Mr. Jackson served as the first President of the system and Mr. Bill Groves was the Actuary and Secretary-Manager at a salary of $400 per month.

The DARS system was one of a handful of Louisiana public pension plans in Louisiana. DARS was designed as a "defined benefit plan for Elected District Attorneys and Assistant District Attorneys to receive benefits based on 1.5% of final average compensation (60 months) per creditable year. The DARS system was originally funded by a 5% deduction from members' salaries, a portion of tax revenues and investment earnings. By March of 1957, the system had a total of $70,000 invested in the bond market, which was yielding 4-4.5%.

[NOTE - DARS Funding: As with other State and Statewide defined benefit programs, DARS is funded by a formula including a percentage of salary from members, originally 5% and now 7%, by statute, a dedicated percentage of taxes, and investment earnings on the same. The total sum needed for payment of benefits is determined on an actuarial basis, considering the benefit structure, projected retirements and salaries. When employee contributions, taxes, and investment earnings fall short of projected needs, employers are required to pay a percentage of salaries to make up the shortfall.] 

In the early years, the business of the DARS board consisted mostly of approving the purchase of government-backed stocks and bonds, the occasional filing cabinet or adding machine.
By January of 1963, the system had total assets of $994,148.27 consisting of government-backed stocks, bonds, FHA and VA mortgage loans. At this time, Mr. Groves routinely performed duties which included the purchase and sale of many of the investments of the system. That year the first system audit was performed by the Legislative Auditor.

Because Louisiana's statutory scheme for retirement systems then provided little operational directive, the meetings of the Trustee board in the early 1960's focused mostly on financial reports and lengthy discussions of service credit and transfers. A common issue was eligibility for drawing benefits while members continued to work as a Judge or Assistant Attorney General. The Trustee Board consistently refused to approve such payments. In a prescient investigative piece, a 1965 newspaper series openly criticized the Legislature for increasing the retirement benefits in some state plans without providing the funding to support the same.

By 1974, District Attorneys Melvin Barre (29th Judicial District), Bernard Marcantel (31st Judicial District) and Ed Ware (9th Judicial District) had been elected to the board. Meetings were moved to 506 Frenchman Street at the offices of Mr. Groves. Albert Lutz (1st Judicial District) became the first Assistant District Attorney elected to serve as a Trustee. The system's investments now had grown to more than $3.5 million.

In 1975, the system had its first independent audit at a cost of $1,200. A year later, the Louisiana Legislature authorized judges to transfer service credit earned in DARS to the Louisiana State Employees Retirement System (LASERS). For years to come, much of the board's time would be spent on approving such transfers. Also, in 1976 Ed Ware became Chairman of the board, Ms. Gloria Benitez became the Secretary-Manager and Mr. Groves was named Consulting Actuary. Mr. Ware would continue as Chairman for the next 30 years.

In 1977, the Chair of the House Retirement Committee was added as an ex-officio member of the Trustee board. Also that year, cost-of living increases were authorized for retirees when excess earnings were sufficient to fund the same. In the late 1970's, our bond investments were solid, interest rates were high, and DARS assumed actuarial rate of return was 5%.

[NOTE - Actuarial Services: Pension plans depend on actuarial experts to determine present funding needs to provide future benefits for plan members. Actuaries examine plan changes and census data and make assumptions on factors such as the rate of investment returns, mortality of plan members, rates of salary increases, rates of termination, and other factors to project the cost of benefits to be paid. To the extent that experience varies from the assumptions, cost will be higher or lower than projected. For example, an increase in the benefit structure will result in an increase in costs and salaries increasing below projections would lower costs.]

The first "rehire" controversy arose in 1978. Baton Rouge Parish District Attorney Ossie Brown wanted to re-employ his long-time Assistant Ralph Roy after Mr. Roy had retired and began to draw benefits. After initially suspending the benefits, the board requested an opinion of the Attorney General on the issue. Upon the advice of the Attorney General, the board reversed its decision and allowed Mr. Roy to receive benefits and continue to work for Mr. Brown. Legislation was later approved to prospectively disallow such a practice. In 1979, a minimum salary requirement of $10,500 per annum, was added to the system plan.

An actuarial valuation of DARS, as of July of 1981, deemed the system to be 86% funded, which was better than the norm for Louisiana public retirement systems at that time. Assets had grown to more than $28 million. The minimum salary was raised to $18,000. In addition to Mr. Ware, John Mamoulides (24th Judicial District), Leander Perez, Jr. (25th Judicial District), Morgan Goudeau III (27th Judicial District) and Reagan Madden (6th Judicial District) were on the board.

In 1982, the DARS Board was made a defendant in the first lawsuit by a former spouse to receive a portion of a member's retirement benefits. Also, that year the board purchased fiduciary liability insurance coverage for its members, added a retired member to the Board, and approved a 15 year mortgage loan at a rate of 13.5% for the Louisiana District Attorneys Association to purchase and renovate a building on 1645 Nicholson Drive in Baton Rouge.

In 1984, the system voted to engage Attorney Robert Schmidt to prepare legislation necessary for member contributions to become "tax- deferred." The legislature defeated the proposal.
1985 saw the birth of the Louisiana Association of Public Employees Retirement Systems (LAPERS) and the formation of the first Commission on Public Retirement to study the increasing costs of public pensions in Louisiana. Also that year, DARS adopted an assumptive rate of return of 7%.

By 1987, Mr. Groves had become the Investment Consultant for DARS and Gary Curran was named Consulting Actuary. The following year, DARS was deemed to be 100% funded. Bill Pucheu (13th Judicial District), Jack Rowley (34th Judicial District), and Charles Bice (8th Judicial District) were elected as Trustees. In 1988, the board adopted an 8% assumed actuarial rate of return.

[NOTE - Unfunded Accrued Liability - The achievement of 100% funding of DARS at this time was in sharp contrast to some of the State pension plans. For example, in 1989, the Legislature had continually increased benefits for State Employees (LASERS), Teachers (TRS) and State Police (LSPRS) without providing sufficient funding through employer contributions, and, therefore, those systems had fallen so far short of stable funding that their debt, more than $6 billion was re-financed by the State.]

It was at the meeting in December of 1989 that Gary Curran first warned the Trustees with the following words, "There is a possibility, at some time in the future, the IRS may determine that the employee and employer contributions of vested members could be taxed at the time of vesting, as DARS is a non- qualified plan." Mr. Curran noted that the risk was not great, but some other public pension plans had drafted legislation to become "IRS qualified." Board members asked Mr. Curran to get more information and report back later. That December meeting also marked the beginning of the Trustees' consideration of a "diversified" portfolio. Mr. Ware suggested that DARS move up to 25% of the portfolio from government guaranteed stocks and bonds and into the stock market.

After Mr. Groves' retirement in 1990, the board selected the firm of Dean Witter as Investment Consultant. The Dean Witter representative, Mr. John A. Vann, suggested that the board invest 55% of the portfolio in the stock market and that we employ managers in each of the following equity markets: Core, Large Cap and Small Cap. The system had assets of approximately $40 million.

In 1992, Mr. Bernard Boudreaux (16th Judicial District) joined the Board. That year, both the elected district attorneys and assistants received a long-overdue salary increase. The following year the DROP program was created and the benefit accrual rate was raised to 3.5%. These added benefits drove up the systems' costs significantly. Increased earnings from the newly-diversified portfolio helped fund some of the costs, but not enough to prevent the new Public Employees Retirement Systems' Actuary Committee (PERSAC) from calling for DARS to collect a 2.5% employer contribution for the 1994 fiscal year. The employer contributions would increase to 3.5% for 1995, decrease to 2.5% in 1996, and disappear in 1998.

[NOTE - Employer Contributions: Because DARS members are paid in part by various agencies, a mandatory employer contribution requires payment from all sources that contribute to salaries (e.g., the State, Local Government, School Boards, etc.) In contrast, any required employee contributions from systems comprised entirely of state employees or entirely of local employees are wholly paid by their respective state or local agencies. Employer contributions for State systems such as LASERS and State Police are a constant and significant cost to the State budget.]

It was in 1994 that Mr. Ware first suggested that the board enter its records on a computer to store the data. By 1997, Ms. Benitez had moved to a part-time employee, the system had begun to be computerized and most operations moved to LDAA Headquarters in Baton Rouge. The new Director was E. Pete Adams and Ms Gwen Hicks became the Pension Secretary. The system's assets had grown to $126 million. That year, John Vann left Dean Witter and was hired as DARS Investment Consultant.

[NOTE- Investment Consultants: Since public pension boards are comprised of elected member- representatives, generally without financial expertise, the law provides that decisions made in consultation with certified financial consultants enjoy protection from certain causes of action. Trustees are held to a "Prudent Investor" standard in exercising their discretion. The Investment Consultant assists the board in developing an investment policy, a strategy to execute such policy, and in making all decisions appertaining thereto.]

In 1994, Assistant District Attorney Houston Gascon (22nd Judicial District) had joined the board. Gary Curran once again raised the issue of IRS qualification. The Board agreed to study the matter and again retained Robert Schmidt to draft legislation. Within a year, the matter was dead, a casualty of an aggressive lobbying effort by members concerned with possible salary and benefit limits.

The mid- to late-1990s saw a steady rise in the market and the Board spent much of its time reviewing asset allocations and the performance of managers in comparison to their respective indexes.

In 1999, three new trustees, District Attorney Anthony Falterman (23rd Judicial District), District Attorney Darryl Bubrig (25th Judicial District) and Assistant District Attorney John Sinquefield (19th Judicial District) joined the board. The Legislature had passed the first set of continuing education requirements for retirement trustees. Bull market conditions allowed removal of employer contributions and the Trustees debated whether to increase our equity investments to 65% of the portfolio under a new pilot investment program. By then, assets had grown to $145 million. In 2000, the rate of return on investments was 17%.

Things were fine until September 11, 2001. The post 9/11 market crash sent DARS and other state systems into a tailspin. DARS investment returns were -10% in 2001. DARS went from $17 million in excess earnings in 1999 to a loss of $13 million in 2002. These losses were also beginning to show up in the DROP accounts of active members. Complicating matters was an opinion of the Attorney General which required systems to indemnify DROP account-holders for any losses. In order to protect the fund, the trustees began to segregate DROP money from the rest of the fund. Since the domestic market was dormant, the Trustees began to look at international stocks and alternative investments such as real estate funds or venture capital funds as a diversification tool. Predictably, the employer contribution rate increased to 3.5% in 2003. The sharp increase in debt and costs caused some lawmakers to suggest terminating some or all defined benefit public pension plans.

In July 2004, the first contested election for a trustee position was won by Assistant District Attorney John Sinquefield (19th Judicial District) over District Attorney Jack Rowley (34th Judicial District) by 52 votes. District Attorney Paul Carmouche (1st Judicial District) was also elected to the board.

In 2005, the board began to discuss the "rehire" issue, and Mr. Vann recommended considering "Exchange Traded Funds" (ETFs) in lieu of active equity managers. By 2006, the market was on a steady rebound but the lingering effects of the 2001 crash sent DARS employer contributions to 6%. In order to stabilize performance and decrease fees, the board voted to move most equity investments to ETFs . DARS assets had rebounded to $194 million.

In 2007, John Mamoulides replaced Ed Ware as the retired member on the Board. Mr. Falterman was elected Chairman, and the trustees initiated serious discussions on "rehire" and "Back-DROP" provisions. Employer contributions were no longer needed and the fund's assets had grown to $221 million. The "Back-DROP" and "Rehire" provisions were approved in the 2008 Legislative Session.

In the fall of 2008, both domestic and worldwide markets had shrunk 50%, and the DARS assets were only valued at $174 million. This deep recession triggered an employer contribution of 5% in 2009. Also, that year, Mr. Falterman was elected as the retired member of the board and re-elected as chairman. Newly-elected trustees were: District Attorney David Burton (36th Judicial District), District Attorney Reed Walters (28th Judicial District) and District Attorney Van Kyzar (10th Judicial District).

In 2010, the market continued to gradually grow. System assets grew to $205 million, but the required employer contribution rate was 9%. Trustees again began to discuss the issue of becoming IRS "qualified." Gary Curran reiterated the risks and advantages of seeking a "qualification letter" and the legislation necessary to obtain the same. Meanwhile, legislative proposals to replace public defined benefit plans with defined contribution plans began to gain public support.

The 2011 market saw a series of wild swings bringing total assets up to $240 million in June and back down to $226 million in September. The 2011 required employer contribution rate was 9.75% and will rise to 10.25% in 2012.

As this is written in early 2012, the Governor has unveiled a plan to have all "new hires" in LASERS come under a defined contribution plan and to increase current member contributions from 8% to 11%. He cites the $18.5 billion debt of the state pension plans. There is growing public sentiment in opposition to defined benefit public pension plans. Such plans are rare in the private sector and the costs of these plans are soaring in this down economy.

The DARS Board has recommended draft legislation that would, in part, help to obtain a "qualification" letter from the IRS. The draft would also provide for cost-saving amendments to the plan that would raise the employee contribution rate from 7% to 8% and would provide for a 60 month period for calculating "final average compensation." The proposal would also add an additional active ADA member to the Trustee Board. If approved, the changes are expected to reduce plan costs by 3.5%. This legislation is pending final review, also approval by the LDAA and the Louisiana Legislature.

As a component of a member's compensation package, our defined benefit retirement plan is a valuable recruitment and retention incentive. The DARS Trustee Board is dedicated to protecting the integrity of
the system and preserving this valuable benefit for our members.