City Council tables vote on pension fix

The City Council tabled a vote on City Manager David Cooke’s final proposed recommendation to make the city’s pension fund sustainable and eliminate its $1.6 billion unfunded liability.

Another Council vote is scheduled for December, and active employees are expected to vote in early 2019 to approve the proposed contribution increases.

The action comes after more than three years of discussions and negotiations between Cooke, members of the Pension Task Force, outside consultants and unions representing the city’s police officers and firefighters.

The four key changes to the plan include increasing contributions from the city and employee groups, changing the cost of living benefit, eliminating future service accruals for sick and major medical leave, and increasing the minimum retirement age to 55 years old.

Increased City ContributionsChanges to Benefits/EligibilityIncreased Employee Contributions
4.5%3.1%2.6%
  • Replace the 2 percent simple and Ad Hoc COLAs with 1% simple COLA for those members currently eligible to receive a COLA
  • Current retirees with at least 25 years of service retain a 2% COLA on first $30,000 of benefit
  • Eliminate COLA for future service for current eligible employees
  • Eliminate service credit for future accruals of major medical and sick leave for all employees
  • Establish a minimum retirement age (55 years old) for future service of Firefighters and Group I General Members. (Group II General Members already have a minimum retirement age of 55)
  • General Employees: 1.1% + 0.7% (Blue Service)
  • Fire: 3.8%
  • Police (25 & Out): 3.8% + 0.9%
  • Begin employee contribution increases June 22, 2019, and phase in over two years for Fire, and three years for Police

The table above is from the final presentation to City Council given by City Manager David Cooke during last week’s Council Work Session.

Change No. 1: Increase contributions from the city and from employee groups.

  • The reform plan proposes that the city, as an organization, increase its contribution to the pension fund to 4.5% of payroll, making the city’s total contribution to the fund more than 24 percent of pay. As a result, the city will go from contributing $92 million toward the pension to $110.7 million annually based on current payroll.
  • All general employees’ contribution will increase by 1.1 percent beginning in June 2019, bringing their contribution total to 9.35 percent.
  • Additionally, employees with Blue Service (service with the city prior to Oct. 1, 2013) will contribute an additional 0.7 percent of their salary for a period equivalent to their years of Blue Service or until they retire, whichever comes first. This provision reflects the greater benefit that employees with Blue Service will receive from the pension fund upon their retirement.
  • Orange Service employees (service with the city after July 1, 2011) will only see the 1.1 percent increase.

Fire employees’ contributions will increase by 3.8 percent to a total of 12.05 percent, to be phased in over a two-year period. Police employees’ contributions will increase by 3.8 percent to a total of 12.53 percent, plus an additional 0.9 percent increase to fund the "25 and Out" provision. This will be phased in over a three-year period. Infographic depicting the breakdown of changes required to make the pension sustainable
Download the PDF documentPDF File

Change No. 2: Change the COLA (Cost of Living Adjustment) beginning in January 2020.

  • The COLA for current retirees with more than 25 years of service will be preserved at 2 percent for the first $30,000 of their base pension, or their annual pension at their retirement before any COLAs are added in. These retirees will receive 1% of their base pension in excess of $30,000. These changes will begin with the first pension check in 2020.
  • The COLA that is already received by current retirees with fewer than 25 years of service will be preserved, but the COLA will change to 1 percent of their base pension for future years of retirement. These changes will begin with the first pension check of 2020.
  • The COLA for all employees with Blue Service will be reduced to 1 percent for past service, and will be eliminated for future service beginning June 22, 2019.
  • General employees hired on or after July 1, 2011; police officers hired on or after Oct. 1, 2013; and fire fighters hired on or after Jan. 10, 2015 are not eligible to receive a COLA upon their retirement. The COLA changes listed above will not impact these employees.

Change No. 3: Eliminate future service accruals for sick and major medical leave.

Beginning in January 2019, unused sick and major medical leave will not be applied toward retirement service credits. This means that future leave that is earned after the January 2019 cut-off date will not be added to an employee’s service credit when they retire.

However, unused sick leave or major medical leave that has already been earned by current employees will still be included as a service credit upon their retirement.

In essence, nothing that has already been earned by employees is being taken away, but no new unused sick or major medical leave time will be added as a service credit going forward. Employees will still be required to use their old sick or major medical leave accruals first.

Change No. 4: Increase the minimum retirement age to 55 years old.

Currently, general employees hired on or after July 1, 2011, (also known as Orange Service employees), have a minimum retirement age of 55 years old.

Going forward, this rule will apply to all future service of fire fighters with either Blue or Orange Service and general employees with years of Blue Service. Police will be exempt from this rule due to their extra contribution to the pension fund that allows for a “25 and Out” provision, meaning that they can retire after 25 years of service to the city regardless of their age.

Fire FightersGeneral EmployeesPolice
No minimum retirement ageHired and retired before June 22, 2019.Hired before July 1, 2011, and retired prior to June 22, 2019.All due to 25 and out.
Minimum retirement age for future serviceHired before June 22, 2019. Impacts service beginning June 22, 2019.Hired before July 1, 2011. Impacts service beginning June 22, 2019.N/A
Firm minimum retirement age of 55 years oldHired on or after June 22, 2019.Hired on or after July 1, 2011.N/A

In a nutshell, if these members reach the Rule of 80 (years of service + age add up to 80) before they turn 55, they will be able to retire at that time. However, the portion of their pension associated with service that is earned as of June 22, 2019 – Gray Service- will not be payable until they reach age 55.

Employee education meetings will be scheduled between now and the Dec. 11 reconsideration of the proposed pension plan.

leverton

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