Auditor General DeFoor: Audits Show Some Improvement in City of Chester Pension Plans, But Still in Severe Distress

February 16 2024

HARRISBURG – Auditor General Timothy L. DeFoor today released audits of City of Chester’s pension plans from 2020-2022 showing that while the plans have made some improvements, they are still considered distressed and administrative issues remain.

“We realize that the City of Chester’s financial issues have been decades in the making, but it must make funding pensions for those who serve the city in critical roles a priority,” DeFoor said. “The city did increase its contributions to the pension plans, which is a move in the right direction. However, it continues to ignore the key problems identified by our auditors which, if not addressed, will only continue the spiral of debt.”

The compliance audits of the City of Chester‘s Police Pension Plan, Firemen’s Pension Plan and Officers and Employees Pension Plan covered the period Jan. 1, 2020 to Dec. 31, 2022. The audits found the city continues to fail to make its legally required employer contributions and its pension guidelines are inconsistent with what is allowed under the law. In the case of the police pension, the city has failed to change benefit provisions that allow retirees to increase or “spike” their future pension payouts by working overtime in their final years of service, which is inconsistent with the state’s Third Class City Code.

DeFoor noted that the aggregate funded status of the city’s pension plans – a measure of the plans’ ability to meet future obligations to retirees – remains at Level III severe distress status, according to the Municipal Pension Reporting Program.

Chester, which was placed under state receivership in 2020, entered Pennsylvania’s Act 47 financially distressed municipality recovery program in 1995. It has long struggled to pay basic operating expenses, a problem worsened by falling revenues during the pandemic.   

State aid for municipal pension plans is generated by a 2 percent tax on fire and casualty insurance policies sold in Pennsylvania by out-of-state companies. In 2023, the Department of the Auditor General distributed a total of $372.77 million in aid to 1,471 municipalities and regional departments to support pension plans covering police officers, paid firefighters and non-uniformed employees.

The department is required by law to audit municipal pension plans and volunteer fire relief associations that receive state aid from the department; liquid fuels tax usage by municipalities; various county offices and numerous other state government entities. 

Explanations of findings are found in the full audit reports linked below or available online at www.PaAuditor.gov/audit-reports.

# # #

Media contact:  April Hutcheson, 717-787-1381 or news@paauditor.gov