Aug. 21 Mail: Too 'Draconian'
The Backpage Editorial on Aug. 14 [“A Burden That Could Lead to Bankruptcy”] suggested a lot of changes to the pension program that would severely hurt employees who have worked for decades. I would suggest a softer approach.
First, I have to say that I agree that Police & Fire Pension Fund Executive Director John Keane should go. He has helped to create the current problem by being unable to look past continuing the current system permanently. That being said, we should allow Walter Bussells and Adam Herbert to remain on the board. It's only fair that a couple of current pensioners also have a say in running the fund.
Curtis Lee had very radical and draconian ideas. Instead, we should reform the three city pensions in these ways:
• Segregate the unfunded pension liabilities from the other budget items and move them into their own category.
• Get a total dollar amount of the unfunded liabilities, then issue pension bonds before bond rates go up too much to make a difference. The savings in the first year would be about $4 million. The savings accelerate as the guarantee on unfunded liabilities increases. On $2.5 billion in unfunded liabilities, this could save a $40 million to $50 million spread from the late 2010s to 2020s.
• To prevent future issues with a pension, require all new employees hired as of Oct. 1, 2014, to go into a 503(b) savings plan. The employees would contribute 14 percent of their salaries — a private sector employee would pay 14.2 percent when adding Social Security to a 401(k) — and the city would pay 7 percent. The city would have no surprise payments into a 503(b) if the market tanks.
• All current employees hired through Sept. 30, 2014, would pay 14 percent toward the pension fund, and the city would pay 7 percent. This reversal in contributions would save $26.156 million per year over the current system.
• Do not change the payout calculations; instead, make it where all retirees with a termination date of Oct. 1, 2014, or later, who are not disabled, would have to wait until age 62 (the minimum Social Security age for the private sector) to receive their pensions. This would not greatly impact the 95 percent of employees who get a new job when they leave the city job. Disabled employees would be able to collect pensions. If 212 new retirees per year deferred their pension an average of 10 years, then the first year savings would be about $7.865 million. The savings in years 10 through 25 would average around $79 million each in current dollars. (This idea by Lucy Miles could save the most money for the city.) Please note: All employees who are disabled would be able to collect their pensions at the time of retirement.
The changes above would save about $38 million the first year (2014). By the mid-2020s, the savings could be a minimum of $155 million per year. Make these less draconian changes. o
Bruce A. Fouraker