Allegheny County DA files lawsuit over ‘looming crisis:’ the county’s unfunded pension

Allegheny County District Attorney Stephen Zappala has filed a lawsuit over what he calls a looming crisis: the county’s unfunded pension.

The lawsuit was filed against the Board of Allegheny County in the Allegheny County Court of Common Pleas.

Zappala says the process to get to this lawsuit began months ago, when a fiduciary of the Allegheny County Retirement Board filed a complaint with his office. That complaint alleged a conspiracy to defraud the Allegheny County Employees’ Retirement System.

The investigation into that complaint is ongoing, but Zappala says part of looking into the issue involved reviewing the retirement system’s finances. That review found that the retirement board determined that the retirement system’s liabilities exceeded its assets by about $1.27 billion. Meaning, that the plan is only 42% funded and not actuarially sound.

Additionally, Zappala’s office found that the Retirement Board’s actuary and Allegheny County’s independent public accountant have been issuing warnings since at least 2016 that the pension fund would be depleted in about 15 years. Those warnings led the Retirement Board to raise county employees’ mandatory pension contribution rate from 9% in 2016 to 11% in 2024, making it one of the highest in the nation.

Zappala also alleges the Retirement Board made aggressive investments to reach its 7.75% assumed investment rate of return, which he says “resulted in unsustainable volatility and significant losses.”

An average county employee, which the board’s actuary currently estimates to be 46.4 years old with 11.3 years of past service, will face an “insolvent system” when they retire, if nothing is done immediately. Zappala says this is why he took action — because “the system cannot function like a Ponzi scheme.”

The lawsuit, which Zapalla says does not affect current retiree payments, makes several requests of the court:

1. Declare that the System is not actuarially sound
2. Order the Defendants to develop a plan to bring the System into an actuarially sound condition of 100% funded status within a reasonable period of time
3. Order Allegheny County to allocate sufficient funds to maintain the System in an actuarially sound condition of 100% funded status within a reasonable period of time as required by the Second Class County Code
4. Enter a judgment against Allegheny County and the Board
5. Restrain the Board and Allegheny County from their deceptive and unlawful administration of the System.

“Allegheny County is facing one of the most serious unfunded pension crises in the history of the Commonwealth Pennsylvania. It is my hope that all parties will work together to ensure that the benefits earned by the System’s participants will be paid as promised,” a statement from Zappala reads.

There is no immediate risk of nonpayment of retirement benefits.

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