FORT WORTH -- The City Council voted 8-1 Tuesday to reduce benefits for new municipal general-fund employees in Fort Worth.
Just modifying the formula to calculate benefits is not expected to fix what city officials describe as a beleaguered retirement system with an unfunded liability of more than $700 million and growing.
Next on the list of possible repairs to the pension system is modifying the cost-of-living adjustments for all general employees.
The problem: As the health and funding of the system improves through benefit reductions, the cost-of-living adjustments for retirees kick in, offsetting any savings and in some cases increasing the unfunded liability projections.
Cost-of-living increases are made depending on whether the unfunded amount can be paid off over a certain period. If the fund is healthy the adjustments kick in sooner.
"We must find an alternative to the ad hoc COLA that is a win for all employee groups and retirees," Mayor Mike Moncrief said. "We have to give them a reason to support a change."
The council has asked City Manager Tom Higgins to work with the Fort Worth Employee Retirement Fund board to create a new option. General employees will have the choice to select the new adjustment or keep their old one. The option rests solely with the employee.
The city got to this point when the market crashed in 2008. City employees are under a defined-benefit plan, which for some guarantees up to 100 percent of their salary in retirement.
Critics have argued that this arrangement has put the quality of life of citizens in jeopardy and could hamper attempts to recruit new business to the city. They say that, when the fund is not sufficient to meet demands, the taxpayers must bridge the gap through higher taxes or reduced city services.
The changes made Tuesday affect only new general-fund employees hired on or after July 1. The new policy has no effect on current employees or retirees. Police and firefighters work under negotiated contracts, which expire in 2012 and 2013. Among the other changes:
Changing the minimum retirement age from 50 to 55
Removing overtime and nonbase pay and putting it into a cash account, like a 401(k)-type account
Reducing the multiplier from 3 percent to 2.5 percent
Removing subsidized joint and survivor benefit
Changing the compensation base for retirement calculation from a high three-year average to a high five-year average.
"I think it's a political move being made on the backs of the general employees," said Vince Chasteen, president of the general-fund employees. "I don't think, when it's time to renegotiate the civil service contracts, they'll hold the civil service to the same as" the general workers.
The Police Officers Association has said it would never accept a two-tiered system for new and veteran officers.
It is possible, officials acknowledged, that by the time the police and firefighters' contracts are renegotiated, the city could have three employee groups working under three benefit systems.
But, Moncrief said, "We cannot keep kicking the can down the road."
One who believes the council is doing just that is Carter Burdette, the District 7 councilman and lone dissenter Tuesday who has pleaded with his colleagues for months to adopt a more aggressive approach.
He voted against resolutions leading up to Tuesday's vote because he didn't think the then-proposed changes did enough and were statements "that this council would not consider an alternative to" the current defined-benefit plan.
Late last year, City Manager Dale Fisseler suggested the city go to a hybrid defined-benefit plan and 401(k)-type system for new general employees. The council rejected that, saying such a change could hurt the city's efforts to recruit the best employees.
The city has almost doubled its contribution rate in recent years, adding about $33 million a year. That has curbed projections of the unfunded liability in 2040 by $1 billion, said Karen Montgomery, an assistant city manager.
General-fund employees will likely be asked to do the same through a vote, officials said. Police and firefighters have indicated they would be willing to increase their contributions to maintain the standard of benefits for all their employees.
John Henry, 817-390-7539