Changes to pension yield younger fire, police forces

Pension actuary report

Chattanooga’s fire and police staff is younger and more able-bodied than it was a decade ago because of changes made to a city pension plan in 2000, according to the fund’s actuary.

Leon “Rocky” Joyner Jr., an actuary for the Segal Co., said Thursday the enhanced retirement benefits approved by Chattanooga voters in 2000 “worked exceedingly well” to reduce the average age of police officers and firefighters and to limit the city’s payroll costs.

In a presentation to the Fire & Police Pension Fund board, Mr. Joyner also blasted a critical assessment of the pension plan as incomplete and misleading. He reassured pension directors that their retirement plan is near the average level of funding for government retirement programs even though its market value was only 84 percent of its liability in 2007.

“You are in a decently funded plan,” Mr. Joyner said.

In a 21-page report, the Segal Co. defended its work and blamed the increased costs to taxpayers for fire and police pension benefits since 2000 largely on less-than-expected investment returns. Since 2000, city taxpayer contributions to the fire and police pension have tripled to more than $8 million a year.

Last year, Cheiron auditors hired by the city concluded that changes made in the Fire and Police Pension in 2000 have cost the city an extra $38 million over the past eight years, or seven times more than what Segal forecast. City voters were told in a ballot referendum in 2000 that adding a deferred retirement option plan and removing the 55-year-old age requirement for retirement would cost no more than $836,000 extra a year.

The Cheiron study also estimated the unfunded liability of the pension plan at $95 million, or $33 million more than what Segal actuaries reported. Based upon the Cheiron assessment, the Chattanooga City Council agreed in February to hire Fort Lauderdale, Fla., attorney Andrew Dale Ledbetter to pursue a lawsuit against Segal, claiming it inaccurately projected the costs of the 2000 pension changes.

Segal Co., one of the nation’s biggest pension actuarial firms, never has been sued or paid any settlement over its advice about DROP plans, Mr. Joyner said.

Chattanooga Fire Sgt. Terri Knowles, secretary to the Police and Fire Pension Board, said the pension board supports Segal despite the threatened city lawsuit.

“The Cheiron study is incomplete, inaccurate and misleads the public and our members,” he said. “Our fund is a strong and successful fund.”

Segal actuaries insist the changes made in 2000 to Chattanooga’s pension plan have not added significantly to the city’s costs and were offset by payroll savings.

In the first two years after the changes, for instance, total payroll and pension costs for the city were $1.4 million less than projected, largely because of the retirement of older, higher-paid employees who took advantage of the plan changes. The average age of the police officers and firefighters — up in most cities — instead declined in Chattanooga from 40.4 in 1999 to 38.1 last year.

BY THE NUMBERS

* 38.1 — Average age of Chattanooga police and fire staff, down from an average age of 40.4 in 1999.

* 4 — Number of police officers or firefighters with more than 30 years service, down from 35 in 1999.

* $256.4 million — Market value of the fire and police pension at the start of 2007, or 84 percent of its liability.

* 23.5 — Percentage of fire and police payroll paid by city taxpayers this year, up from 8.2 percent in 1999.

Source: The Segal Co.