Fire, police pension plan heads to 'cost neutrality'

Fire, police pension plan heads to 'cost neutrality'

April 5th, 2011 by Cliff Hightower in News

Chattanooga City Council member Jack Benson, Sr., speaks out during a 2010 council meeting to vote on a 37 cents per $100 of assessed value tax increase.

A retirement benefit for Chattanooga police officers and firefighters will become "cost neutral" over the next seven to 10 years, a report shows.

The report, compiled by the Segal Co., a benefits consulting firm, states that half the city's police officers and firefighters are now under an old pre-2008 plan in which they pay 9 percent of their salary into the city's deferred retirement option plan, or DROP. The other half pay into an 8 percent plan.

The study, handed over to the City Council last week, shows those under the 9 percent plan are costing more money for the Police and Fire Pension Fund. As those under that plan retire in coming years, the DROP will become cost neutral, the report states.

"The DROP option will become a smaller and smaller component of [retirement] plan cost, and over the next seven to 10 years will become cost 'neutral,'" wrote Leon "Rocky" Joyner, vice president and actuary for The Segal Co.

But the study didn't detail exact numbers on the difference between the 9 percent and the 8 percent plans.

The DROP was introduced in 1999 as a way to entice police officers and firefighters to retire at an earlier age. Officers and firefighters can opt into the program after 25 years of service. They then pay a percentage of their salary into the program for three years.

At the end of the three years, they then receive a lump-sum payment for retiring.

City Councilman Jack Benson said Monday he was still a bit skeptical of the report, and he thinks a component of the DROP could be costing the city money.

"That's seven to 10 years before it becomes cost neutral," he said. "There's no report on what it's going to cost taxpayers."

During changes made in 2008, the council decided that a five-year report on the pension fund would be due by March 31, 2011. The Fire and Police Pension Board, the fire chief, the police chief and city personnel director were also required to give the council reports on the pension fund.

City officials said Monday those reports have not been delivered.

Document: Report on the Chattanooga Fire and Police Pension Fund

"We are in the process of reviewing the Chattanooga Fire and Police Pension Report and are unable to comment on the finding at this time," said Richard Beeland, spokesman for Mayor Ron Littlefield.

Terry Knowles, president of the Chattanooga Fire and Police Pension Board, said he did not want to comment on the report at this time since it deals with the needs of Chattanooga Officer Tim Chapin, who was killed in the line of duty over the weekend.

"Sgt. Chapin's tragic death points to the importance of the benefits our public servants deserve," Knowles said. "It's a conversation worth having in the future, while today is a time to grieve, pray and support Sgt. Chapin's family. The Pension Fund Board will do all it can to meet the needs of the family."

Police union members had said they planned to address the City Council on Tuesday during its regularly scheduled business meeting. Detective Phil Grubb, president of the International Brotherhood of Police Officers, said Monday that plan has been postponed while the police department grieves the death of Chapin.

Councilwoman Carol Berz, chairwoman of the Budget, Finance and Personnel committee, said Monday she had received the Segal Co. report, but has not yet had a chance to read it. She said the council has no immediate plans of addressing the report.

"We'll possibly look at it after the mayor presents his budget," she said.

The mayor is expected to present his budget sometime in May.