Thursday, October 28, 2010

Proposed City Pension Changes

Well, it’s finally out in the open.  The Board of Trustees for the two city pension systems are looking at changes to the benefit structure of the pensions offered city employees. Why? Because the city's contribution is getting extremely high.

A lot of things impact pension assets and liabilities and the city's contribution to the pension funds, but two biggies affecting these two pension systems are the investment returns and retiree health insurance. OPEB changed everything for public pensions when it became effective. Valuing retiree health care benefits and actuarially funding them has caused the cost of the retiree health benefit to climb to astronomical proportions affecting the employer contribution.

The employer contribution is a % of payroll which comes out of the General Fund. Guess who wants money out of the General Fund to pay for the Event Center? The Mayor has to do something to build up that reserve fund. 

Where I once administered the two pension systems as the City’s HR Director, I am now simply a retiree who depends on my pension to live and my retiree health benefit to keep me from bankruptcy. Retiree health benefits are an important, but costly benefit. They are especially costly for police and fire employees who can and do retire at 50 or 55 years of age. That’s a long time to fund retiree health benefits for the retired employee, his/her spouse and in some cases dependents. For retirees like me who come from the general employee group, the cost exposure is only 5 years because general employees can’t retire before age 60 unless the general employee has 30 years of service at age 55 where combined age and service gives them the ability to retire early. 

As a retiree, I am on the city’s retiree health plan and will be until I turn 65 and become Medicare eligible whereby my city coverage will terminate. Make no mistake about it, it is a valuable benefit to retirees. What are the implications to me if I were to lose my benefit and get a $500 stipend from the pension system? Right now I pay $374.04 for single coverage which is 50% of the total premium. On the face of it, I could get more money in my pocket with this deal, right? I don’t think so. 

First, buying single insurance coverage on the open market is a very dicey thing. Second, my age is going to work against me. People my age begin to have health issues and insurance companies hate people my age and older because we cost too much.  We have health issues and use our health benefit. Private insurers have the same cost issues the City has with us older folks. Sure, I am probably going to be able to buy some sort of coverage out on the open market, but I am going to pay more in monthly premium, deductible, and out of pocket expenses. Is it going to be a good deal for retirees? No, I don’t think so.

Retirees are powerless, though, because as retirees, we no longer have a voice.  We can’t vote.  City ordinance requires any change to the pension benefit must be voted on by the membership.  A change to the retiree health benefit must be voted on by the membership. The membership is all active employees. Active employees will have to decide if this benefit is important to them and if they are willing to increase their contribution to help pay for it.  

I don’t know what is going to happen. When I retired, I made my decision based on certain facts at that time. Taking away a promised benefit after the fact seems unfair to the retirees. I do know pension changes take time.  I hope I turn 65 before this goes into effect.  I know a $500 stipend will not pay for the kind of insurance coverage I now have as a City Retiree. If it happens, it is surely a broken promise.

1 comment:

  1. I couldn't agree with you more, Jen. The benefits that we retired with are what we counted on when we made the decision to retire. I have 5 years to go until I am eligible for Medicare. Do you think it will take them that long to figure out what they are going to do to us??? I hope so. It really isn't fair.