Firefighters make pension offer to Town
Editor & Publisher
The Longboat Key Firefighters through its union negotiator, Attorney James Brantley, proposed to Town Manager Dave Bullock last Thursday that all future hires enter the Florida Retirement System of pensions and current employees would incur changes, according to Brantley, aimed at cutting cots to taxpayers.
In a sense, the proposal is an effort to sway the Manager from his stated position that he is seeking a system of defined contributions and a desire to remove the risks of unpredictable funding and changes in market conditions off of taxpayers.
The union and Bullock have been locked in negotiation with the Firefighters offering concessions on Thursday, but a variation of a defined benefit model.
On Thursday, the changes proposed include closing the existing plan to new members. They would enter the state pension system. The plan would not be terminating for existing employees, but modified in the following ways:
• Keep existing employee contributions at 10% of payroll.
• Move all future employees into the FRS.
• Reduce the multiplier used to calculate final pension payouts from 3.5% to 3% for all benefits accrued after the closing date.
• Anyone who retires or enters the DROP program would have final pension payouts capped at 85% of salary, except for currently vested members who already exceed that cap.
The DROP program allows retirement age employees to return without pension inclusion and work for the Town with no pension contributions being made and no benefits accrued. They receive their monthly pension check, which accrues in a DROP account.
• The proposal seeks to define a specific window of time employees can enter the DROP. — a decision window after which they could not change their election.
• Cost of Living adjustments not started until 7 years after separation from the Town.
• Lowering the years of service needed to retire to 20 at any age.
• No sick or vacation pay used in final pension payout calculation.
Brantley said the payments to the FRS system will be far more predictable, lower as a percentage of payroll and less volatile than the Town’s current system.
Brantley also said the proposed changes for existing employees will save money and reduce the unfunded liability in many respects. He urged an actuarial study if the Town was interested in the proposal and to calculate the impact.
Bullock and staff listened to the proposal and asked questions to understand the proposal.
Bullock will decide by next week whether to request an actuarial study of the proposal be initiated by the pension board. Bullock and the firefighters plan to discuss the matter next Tuesday at 4 p.m. in Town Hall.
Bullock’s standing proposal
In the face of a $27.5 million unfunded pension liability in the Town’s three classes of employees, Bullock is proposing to freeze the current defined benefit plans and convert all employees going forward into a 401(A) plan.
But the act of converting the Town’s pension plans is not unilateral. Bullock must successfully negotiate a contract with the firefighter’s union first since that contract is up for renewal in September.
The Police contract would be next and General employees have no union so the 401(A) can simply be imposed.
In short, the Bullock’s proposal mandates a 10% contribution from the Town and a 3% contribution from the employee. The Town will then match up to an additional three percent, making the maximum town contribution totaling 13%.
To put the cost into perspective, Bullock said the pensions currently cost the town about 60% of payroll — “a simply unsustainable number, ” said Bullock.
Bullock set the following goal and objectives for the Fire Department:
• Maintain a high level of public safety for our citizens.
• Provide most the effective service delivery model at an acceptable cost.
• Align desired service levels with citizens’ willingness to pay.
Bullock said it is the last of these three that is currently not being met. His presentation then goes on to address these three goals:
• Provide a fair and reasonable pension for Town employees.
• Design a predictable and sustainable solution for taxpayers.
• Pay off the unfunded liability.
Costs can be capped
Bullock says that in his 401 (A) plan the cost to the Town will be capped at a maximum of 13% of payroll instead of the 60-plus percent being paid today.
In fact, the Town’s annual contributions to the Fire Plan have increased 430% in eight years, from $347,0000 to $1,493,000. As a percentage of payroll, the Town’s contribution has grown from 16.80% to 60.27%, an increase of 359% since 2005.
Meanwhile, Bullock notes, the employees’ contribution rate has remained the same, at 10%. Bullock notes that the employees’ contribution stays level while the community is currently assuming all of the risk.
Bullock has met several times with the bargaining unit from the firefighters’ union and if he cannot reach an agreement, impasses hearings are set. If an impasse fails, then the Town Commission is the final arbitrator and can impose the contract.
Read below the salient details of the Town Manager’s proposal:
Town Manager’s 401(A) proposal
• All benefits in the current Fire Pension Plan would be frozen.
• All employees keep all vested benefits.
• No new benefits would accrue beyond the date the plan is frozen.
• Employees hired after the date the plan is frozen would not be eligible to participate in the Chapter 175 Defined Benefit Plan would have no impact on the retirees or employees who retire before the Plan is frozen.
• A new defined contribution retirement account is established for every employee in the bargaining unit.
All current and future employees would participate in a new Town Section 401 (A) Defined Contribution Plan
• The Town would contribute 10% of the fire employee’s base salary.
• There would be a mandatory employee contribution of 3% to the 401 (a) plan.
• The Town would match the next 3% of employee contribution dollar for dollar.
• Maximum Town contribution is 13%.
• Employees may contribute up to the maximum legal limit.
• The Town will continue to pay Social Security for the employee.
• Vesting in the Town’s contribution would be 100% after five years of continuous service.
• Current employees would receive past service credit toward the five-year vesting requirement.
• If an employee leaves before five years, he/she would get all of his contributions back, including interest, and can take it with him/her when they go to work for another employer or cash it in and pay the required penalties.
• Employees would control the investments of their accounts by selecting from a wide range of Funds.
• If an employee leaves who is fully vested (five or more years of continuous service), the entire amount, including all Town contributions and interest, are under the employee’s control in accordance with applicable law.
• Since the mandatory contribution for the plan is lower (3% instead of 10%), employees who make only the mandatory contribution will see an increase in their pay.
• The balance in the employee’s account upon death is inheritable by the employee’s beneficiaries.