Police And Fire Retirement Plan

Police, Fire, and the Taxpayers Deserve the Negotiated Retirement Option By Paul F. Curry

The Police, Fire and City negotiated a partial lump sum retirement option in 2003. All the parties to this agreement and plan should work to preserve this collectively bargained benefit. The City has a responsibility to the Unions and to the Taxpayers to challenge the Auditors General’s findings. The reasons are compelling and straightforward. First, the retirement option plan was the fruit of intensive negotiations between the City and the Unions.

The process of negotiation should be respected. The use of negotiation instead

of litigation should be encouraged. With budget problems straining relations with the Unions, now is the time for the City to support the negotiating process by supporting the agreement. Second, the Taxpayers will suffer if the City abandons the plan. The Unions have an expectation that the City will not unilaterally change benefits. There is no dispute that the partial lump sum retirement option is a benefit. There is a virtual certainty that the Unions will win if they pursue litigation. The result will be a loss for the Taxpayers. Third, the Taxpayers received definite savings from implementing the plan as higher paid officers were replaced with new recruits, or not replaced at all. This savings per officer was documented by each union as well as the City during negotiations.

These savings occur

regardless of the state reimbursement issue. The City must not lose sight of the savings from the current group of officers who were planning to retire. Fourth, it would be unfair to this current group of officers to take away the benefit. The Unions and City agreed that retirements had to be staged over several years to protect public

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safety. Too many retirements the first and second years at once would equal too great a loss of experience. The current group of officers should not be penalized by City Council’s rush to void the agreement and plan. Fifth, the City has a very winnable position. The plan is a partial lump sum retirement option.

It is not a reverse DROP.

This last point is very important and deserves more

explanation. The City did not implement the DROP plan awarded to the Police and Fire by arbitration panels. Mayor Filippi challenged these DROP plans because of concerns over the cost to the Taxpayers and because those DROP plans might not pass the Auditor General’s reimbursement criteria. Instead the City and Police and Fire Unions agreed upon a partial lump sum option which a retiring policeman or fireman could elect. A partial lump sum option is an accepted and legal retirement option often offered under a standard defined benefit pension plan. Under the City’s plan a policeman/fireman remains a City employee until the day of his retirement and, most importantly, the policeman/fireman contributes to the City pension plan until the day of his retirement. The City’s plan is cost neutral to the City and its Taxpayers. When a policeman/fireman elects the partial lump sum option they receive a cash payment and a reduced monthly pension benefit for the remainder of their lives. The plan requires that the amount of money set aside by the pension trustees for (1) a policeman/fireman’s full monthly benefit payment or (2) a policeman/fireman’s partial lump sum and reduced monthly payment be actuarily equivalent, and therefore, of no additional pension cost to the city.

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The misreporting of how the plan operates has been a disservice to the City, the Unions, and the retiring officers. The retiring officers have not received a “retirement bonus” or some type of windfall. These retiring officers are simply receiving their earned and well deserved retirement benefit. The pension plan trusts exists to pay the policemen and firemen these benefits. The payments, whether they are monthly checks or partial lump sum payments, represent the payment of benefits to the trust beneficiaries. It is inaccurate to describe the partial lump sum payments as a “cost” to the City while not applying the same label to the much larger amount of monthly benefit payments. So let’s get back to basic truths in the discussion. The police/fire pension plans are funded by police/fire employee contributions, by City of Erie taxpayer funds, and by Pa. State reimbursements. The retirement benefit paid to a policeman/fireman is actuarily the same (ie. same cost to the plan) regardless of the retirement option. The partial lump sum option did not increase the City’s (Taxpayers) contribution to the fund. The City did not implent an illegal reverse DROP. The City should challenge the Auditor General’s findings in order to preserve the reimbursement payment the City deserves.

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