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 could also help bring the city's retirement funding gap under control.
The Fort Worth Police Officers Association offered its own proposal, which would increase its members' contributions to the plan in exchange for retaining key parts 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 include:• Eliminating overtime in benefit calculations to head off spikes in retirement pay.• Lowering the multiplier used in determining the percentage of base salary that an employee retires with, to 2.5 percent from 3. The change is already in place for general employees hired since July 1, 2011.• Using 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.• Setting a minimum retirement age of 55 for general employees hired after July 1, 2011. Other general employees would have no minimum age. Police officers have a "25 and out" provision.• Providing flexibility for cost-of-living adjustments. Certain retirees and current employees, who several years ago chose a variable annual COLA on their retirement pay instead of one fixed at 2 percent, would be given a one-time opportunity this year to switch to the fixed 2 percent adjustment for past service. That switch would be available to police now on the payroll and general employees hired before July 1, 2011.New police employees would not get a COLA. A zero COLA already is in place for general employees hired after July 1, 2011. The city staff has 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 how long it would take to pay down the retirement 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. The proposal would retain the current multiplier, calculate retirement pay on an average of the highest three years, cap any spikes in those years' 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.Sgt. Steve Hall, president of the police association, called the staff recommendations "knee-jerk reforms" and "penny wise and citizen-wise foolish." He asked the council to consider the association's proposal, which he called "real reform that recognizes the dangers of line-of-duty police work."Tough choicesCouncil members responded that they need to make changes to protect the pension plan's stability and are mindful of the effects on employees."This is not an easy decision. This is a difficult decision," Councilman Dennis Shingleton said.Councilman Danny Scarth said the council has few choices given that "our taxpayers have said we don't want to put any more money" into 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."Susan Alanis, the assistant city manager shepherding the pension review, said the staff isn't clear yet on how the police proposal would affect the pension.The city's actuary estimates that if the city's retirement plan is not changed, it would face a $964 million funding gap, payable in as few as 82.1 years. With the recommended changes, it would face a $1.2 billion gap payable in as few as 50.3 years, if the fund earns 7.5 percent annually. 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 will review the plan's assumptions in January.The proposed changes have drawn mixed reactions from employees, ranging from acceptance of the need to limit the pension's liability to skepticism over the cost-of-living proposal.Seventy-two percent of active employees and 43 percent of retirees are in the variable COLA, which has paid off in three of its five years of existence and won't pay off this year. The variable COLA ranges from 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 employees and those in other departments. "The general employees are subsidizing a lot of this," said Vince Chasteen, head of the Fort Worth general employees association.Chasteen said that 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 now put 8.25 percent of pay into the retirement fund. Police employees agreed several years ago to put more of their pay into the fund.To increase employees' participation in the plan, state law requires their majority approval in an election, Alanis said. The city would still retain the risk, and inflationary pressure on wages would rise.Scott Nishimura, 817-390-7808