The Fort Worth City Council started the clock ticking Tuesday on major changes to the city’s pension plan that would reduce benefits for police and general employees, but potentially bring the city’s retirement funding gap into check.
The Fort Worth Police Officers Association put up its own proposal, offering to increase its members’ contributions to the plan in exchange for retaining key components of the retirement pay formula.Council members gave 90 days’ notice of potential changes, including the police association proposal to give themselves time to review it. A final vote is tentatively set for Oct. 16. The changes would go into effect after Jan. 1.Firefighters, whose collective bargaining contract covers the pension, wouldn’t be directly affected. But the city will seek the same changes in upcoming contract talks, which the firefighters association has asked to begin Oct. 1.“I think it’s a good proposal, I think it’s a fair proposal,” Mayor Betsy Price said in an interview. As the council continues its review, she said, “we want to hear back from the concerned parties.”The changes would reduce benefits for future service, but not benefits already accrued, which are protected by state law.Key changes:(bullet) Eliminate overtime in benefit calculations to head off spikes in retirement pay;(bullet) Lower the multiplier used in determining the percentage of base salary an employee retires with, to 2.5 percent from 3. The change is already in place for general employees shired since July 1, 2011.(bullet) Use an average of the highest five years of base pay instead of the highest three to calculate base retirement pay. The change is already in place for general employees hired since July 1, 2011.(bullet) Minimum retirement age of 55 for general employees hired after July 1, 2011. No minimum age for other general employees. Police have a “25 and out” provision.(bullet) Cost of living adjustment. Certain retirees and current employees, who several years ago chose a variable annual COLA on their retirement pay over a fixed 2 percent, would be given a one-time opportunity later this year to switch to the fixed 2 percent for past service. That switch would be available to police now on the payroll and general employees hired before July 1, 2011.There would be no COLA for new police employees. A zero COLA already is in place for general employees hired after July 1, 2011. City staff have recommended the move to a fixed COLA to lower risk and give employees and the city more certainty.The variable payout is based on an annual estimation of the number of years it would take to pay down the reitrement fund’s unfunded liability, and current estimates suggest no payout for 21 years. Moreover, figures on the pension’s liability with no changes don’t include the variable COLA, which can range as low as zero.The police association proposed to increase its members’ contribution – now at 8.73 percent of annual pay -- by 3 percentage points over three years. It would retain the current multiplier, calculate retirement pay on an average of the highest’ three years, cap any spikes in those year’s pay at 12 percent over of the base preceding the highest years, and cap annual retirement pay at 90 percent of the highest three years’ average.Police Sgt. Steve Hall, president of the Fort Worth Police Officers Association, called the staff recommendations “knee-jerk reforms” and “pennywise and citizen-wise foolish” and asked the council to consider the association’s proposal.“It is real reform that reconigzes the dangers of line-of-duty police work,” Hall told the council.Council members responded that they need to make changes to protect the pension plan’s stability, but said they’re mindful of the impact on employees.“This is not an easy decision, this is a difficult decision,” Councilman Dennis Shingleton said.Councilman Danny Scarth noted the council has few choices, given that “our taxpayers have said we don’t want to put any more money in” to the pension.“The only thing we have today to work on is what we pay out in benefits in the future,” he said. “We owe to every one of those employees to make darn sure this fund is stable for the next 40, 50, 60, 70 years.”Of the proposed changes, he said, “we may or may not do all of them, but we’ve got to take a look at them.”Susan Alanis, assistant city manager who has been shepherding the pension review, said the staff isn’t clear yet on what impact the police proposals would have on the pension.The city’s actuary estimates the retirement plan, with the recommended changes, would face a $1.2 billion funding gap that could be paid down in as few as 50.3 years, if the fund earns 7.5 percent annually.That compares to an estimated $964 million gap, payable in as few as 82.1 years, with no changes. The liability rises under the changes because the calculation would include the fixed COLA.The changes reduce the city’s expectations for investment returns from the current 8.25 percent set by the Fort Worth Employees’ Retirement Fund.Ruth Ryerson, the fund’s executive director, said the board in January will review the plan’s assumptions.The proposed changes have met with mixed reaction from employees, ranging from acceptance of the need to collar the pension’s liability to skepticism over the cost of living proposal.Seventy two percent of active employees are in the variable COLA, which has paid off in three of its five years of existence and won’t pay off this year. Forty three percent of retirees are in it. The variable COLA has a range of zero to 4 percent, the highest paying off only in years when the unfunded liability is estimated to be payable in less than 18 years.Marsha Anderson, president of the Coalition of Retired Employees, said many retirees question the estimates that the variable COLA won’t pay off again for two decades.“There’s a huge amount of mistrust,” she said.Some general employees are skeptical of differences between benefits for public safety and other employees.“I don’t know why you rush to segregate sections of your employees.” Vince Chasteen, head of the Fort Worth general employees association, said. “The general employees are subsidizing a lot of this.”Chasteen said at least some general employees would be interested in putting more of their pay into the retirement fund in exchange for retaining benefits. General employees currently put 8.25 percent of pay into the retirement fund. Police employees agreed several years ago to put in more of their pay into the fund, at the same time they won the “25 and out” provision.Increasing employees’ participation in the plan would require a majority vote by them in an election under state law, Alanis said. The city would still retain the risk, and inflationary pressure on wages would be heightened.And, “we’re concerned that not everybody could afford it,” she said. The city urges employees who can afford to save more to use deferred compensation programs, she said.Scott Nishimura, (817) 390-7808