Council holds off on increasing firefighters’ pension benefits

Relief Association’s request gets tabled for the time being  

Plymouth Firefighters Relief Association approached City Council to request an increase in pension benefits at a special meeting Jan. 22.

Plymouth has 75 active firefighters, 12 deferred members and five retired members paid monthly.

Currently, for every year of service, Plymouth firefighters receive $7,500 towards their pension. Firefighters are partially vested after 10 years of service and at retirement are eligible to receive 60 percent of the total amount in a lump sum payment as long as they are 50 or older.

The association’s request was to increase the annual defined benefit 10.7 percent to $8,300 per firefighter per year of service.

Firefighter pensions are funded through state fire aid and investment earnings based on the Plymouth association’s portfolio.

State fire aid consists of a two percent fire insurance premium tax, and the aid is distributed to Plymouth based on population and property value within the city.

An issue the council had with raising pension benefits for firefighters was the instability of state fire aid. As it stands, Plymouth makes no contribution to the pension program. However, if the program becomes underfunded, the city would need to implement a tax levy to cover the cost of the benefit.

Administrative Services Director Dave Callister and Human Resources Manager Giovanna Koné told the council:

“As is the case with all state funding sources, the annual aid amount fluctuates and is always subject to legislative tinkering. To this extent, the future of state fire aid is uncertain.”

Historically, Plymouth firefighters have received a high pension payout in relation to similar cities in the metro area.

The last pension increase occurred in 2007 when the contribution amount was bumped to the then-maximum of $7,500 annually. This year the state allows a maximum benefit of $10,000 a year.

While Plymouth’s pension contribution falls under the state maximum, it remains the highest in the area with only two cities in a 10-mile radius contributing as much.

The association argued an increase is overdue.

“An increase is overdue; over the last 15 years, we have historically seen a pension increase every three years and our last pension increase was six years ago,” and “We are currently over-funded for the increase.”

As of Dec. 31, 2012, Plymouth claimed assets in excess of $7 million compared to $6.3 million exactly a year prior. According to the last Actuarial Valuation, the program would be over-funded with an increase to $8,300 by three percent.

“I’m looking at purely numbers. Right now, we are over funded at $7,500 a year,” said association president Kevin Werstein. “We are also over funded if we move to $8,300 a year. Part of our responsibility is that, if we are over funded, we need to look at raising the pension. We don’t want to keep getting over funded and not come to you imploring. We want to do what’s right for our members.”

The council remained leery, however, because of uncertainties tied to the pension program.

While the PFRA’s portfolio has done exceptionally well, the council acknowledged the murky economic climate and the possibilities of further recession in the coming years.

And should assets decrease to the point where the pension program is underfunded, a city contribution would kick in to cover the gap.

“My problem is the downside for the taxpayers,” said Councilmember Jim Willis. “The whole risk is on the city, that’s just the way the cards are dealt for both of us. And that’s what I worry about with this. There’s no backstop except our taxpayers.”

Steve Marti, an association trustee, said firefighters deserve the pension increase because of the very nature of their jobs.

“I joined later in life, and I was glad to be on the department. And you don’t join for the pension,” Marti said. “And when I think about what I earn per hour and that I’m putting my life on the line to save someone else’s life, I feel like I put in the time and effort to help the city, and I think I’m worthy of the money if it’s there.”

No one disagreed with the value the fire department added to the community.

“You’re not even close to where you need to be, we should be paying you a million dollars a year. Your pay does not commensurate with what you do in the community,” said Councilmember Tim Bildsoe. “We can’t pay you enough, but we live within certain constricts.”

The council left the door open to revisit the pension raise in the near future.

“My feeling is that more time to discuss is [to the association’s benefit],” said Councilmember Judy Johnson. “If we were to vote right now, I don’t think that we’d be ready to make the commitment you’re asking for. We need more time, discussions and legislative intent.”

“The world of pensions has changed,” said City Manager Laurie Ahrens. “It’s a much riskier place than what it was. That isn’t to say [an increase] wouldn’t be a good idea. It feels like [the economy] is on the upward swing, and maybe it is. I guess I wouldn’t close the door on anything.”

Contact Brian Rosemeyer at brian.rosemeyer@ecm-inc.com

 

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