Minimum retirement age
Current: None/Pension Board original plan: 50/Task force proposal: non-vested members 50, new hires 55
Current: 8% or 9%/Pension Board original plan: 9%/Task force proposal: 3 year tiered 9 to 12 % or 8 to 11 %
Cost of living adjustment
Current 3 %/Pension Board plan: Market value / Task force proposal: average 1.5 %*
Current Yes /Pension board plan: Yes, unchanged/Task force proposal: Yes, but with no interest
Savings to city
Current: n/a/Pension board plan: $126 million/Task force proposal: estimated $200 million
* For two years the COLA would not be compounded
An actuary firm has to calculate the cost of savings to the city; this is only an estimate from officials
The proposed changes to Chattanooga's police and fire pension plan that Mayor Andy Berke blessed Thursday would hike employee contributions by as much as 37 percent and cut cost-of-living raises to save the city as much as $200 million over 26 years.
No one can say yet the proposal will ultimately accomplish the intended goal of ensuring the city's $150 million unfunded liability is significantly reduced. That answer will come after two actuary firms, The Segal Co. and Cavanaugh Macdonald Consulting, study the proposal and project an outcome.
Berke said the plan submitted by his handpicked 18-member task force is fiscally responsible while still protecting the workers who protect city residents' lives and property.
"It provides the right balance to ensure we have a motivated workforce, that our beneficiaries will actually receive their benefits and the city taxpayers are treated responsibility," Berke said.
Union leaders who stood with Berke during the proposal's unveiling said they were able to keep a pension plan that is still attractive.
"I feel like we have won because we have a defined-benefit plan that most of the other agencies across this nation do not have and it's going to be solid," said Sgt. Toby Hewitt, president of the Chattanooga Fraternal Order of Police.
The proposal emerged Wednesday night after task force members negotiated the terms for 13 hours behind closed doors.
Berke formed the task force in August to find a way to reduce the city's unfunded liability to the Police and Fire Pension fund, which currently is only 60 percent funded. The group of business and union leaders and police and fire officials was tasked with keeping the plan attractive for future recruitment and for encouraging employees to stay with the city for long careers.
Uncertainty over the future created fear. Forty three officers and firefighters retired early last year, double the number in an average year. Among them were Police Chief Bobby Dodd and most of his command staff. Dodd said the possible pension cuts were one reason he chose to leave the department early.
Overall, the mayor highlighted that the changes won't cut current retirees' checks.
But the proposal will reduce their cost-of-living adjustments from a guaranteed 3 percent to a tiered system. Retirees at the lowest end of the scale will receive a 2 percent COLA; those at the mid-range will get a 1.5 percent COLA and 1 percent will be given to the highest-paid employees.
Berke said the changes are expected to save the city about $200 million over 26 years and could lower the city's pension contribution level by $4 million to $5 million each year.
This year the city contributed $14 million to the pension fund. In order to fund the current plan without any changes, the city's annual contribution would need to triple by 2038.
IN THE DETAILS
Some of the other changes will restrict new hires from drawing from retirement before age 55; current employees with less than 10 years' service won't be able to retire before age 50, while vested employees won't have an age requirement.
An average employee with a salary of $44,786 who pays 8 percent into the fund would see his share rise from the current $3,582 by more than $1,300, to $4,926.
The plan retains the deferred retirement lump sum option, or DROP, for officers and firefighters and extends it to 33 years from 30 years. The DROP allows retirees to take benefits from the last three years of work in a lump sum.
But the compromise is that employees with fewer than 24 years of service won't receive any interest when they take their DROP. Current retirees get either 7 or 4.75 percent interest, depending which of two DROP plans they're in.
The proposal also would raise monthly checks for elderly widows of public safety employees from the current $500 to $750 a month.
NEXT STEP: VOTES
The proposal must pass a vote of the Fire and Police Pension Board and the City Council. The board's spokesman, Vince Butler, said members first will have to see what the savings will be before signing off on the plan. Butler said the board is pleased an agreement was reached that could avoid putting the proposal to a public referendum.
"We all agree a consensus solution to this issue is our best option," he said. "I don't think a referendum would benefit anybody."
Fire and Police Pension Board President Chris Willmore had said he would oppose two earlier options. On Wednesday, pension board members were invited to listen to the negotiations, but Vince said they didn't participate in the discussion.
No date has been set for a vote. Originally, Berke asked the pension board to vote at its Feb. 6 meeting, but that will depend on whether the actuaries' work is done.
The task force will meet one more time publicly to go over the estimated savings and changes to the plan before the board votes.
Contact staff writer Joy Lukachick at firstname.lastname@example.org or 423-757-6659.