Pension proposal offers reduced benefits for future hires
PARKERSBURG — Benefits for current police officers and firefighters, as well as retirees and beneficiaries, won’t change if Parkersburg City Council elects to close the existing pension plans in an effort to get rising costs under control.
But police and fire employees hired after the change is made would be part of a state-run system that costs less and does not provide the same level of benefits.
If council votes to close the current plans, anyone hired afterward would join the state Municipal Police Officers and Firefighters’ Retirement System.
That is managed by the West Virginia Consolidated Public Retirement Board, which also oversees the Public Employees Retirement System, under which the city’s civilian employees are covered.
According to data provided by the Consolidated Public Retirement Board, those employees would contribute 8.5 percent of their salary, an amount the city would match.
Documents filed by the city with the state’s Municipal Pension Oversight Board show employees hired on or after Jan. 1, 2010 contribute 9.5 percent of their salary, while those hired earlier put in 7 percent. Currently, the city does not pay an individual match for each employee but must contribute 107 percent of the total amount paid to each pension the previous year.
That currently works out to $89.50 for every $100 of employee salary the city is paying, Blair Taylor, executive director of the Municipal Pension Oversight Board, said when meeting with City Council’s Finance Committee earlier this week.
“That $100 would cost you an additional $8.50 in the new system,” he said.
If the city closes the funds, no matter which funding method it selects, it will continue to pay a much higher rate per $100 as it works to fully fund both pensions, Taylor said.
The minimum payment does not even cover all of the benefit payouts each year for the police pension. But rather than dipping into the balance of the police fund, the city is paying those extra costs out of general revenue, Taylor said.
“From that perspective, the city has been going above and beyond already,” he said.
The normal retirement age under the current plan is 50 with 20 years of service or 65, whichever is earlier. Under the new plan, enrollees can retire at 50 if they have 20 years of service, at 60 with 10 years of service or 62 with five years of service.
Retirement benefits are based now on the average of any three 12-month consecutive periods that produce the highest average annual compensation. Under the new plan, it would be the average of the five highest consecutive years out of the last 10.
The current plan pays 60 percent of that final average salary, with additional amounts for each year of service between 20 and 30.
Under the new plan, benefits amount to 2.6 percent of the final average for each of the first 20 years of service, increasing for years 21 to 30.
The current plan provides beneficiaries with a cost of living adjustment after they’ve been retired for two years, based on the Consumer Price Index utilized by the federal Social Security program.
The new plan has no provision for a cost-of-living adjustment (C.O.L.A.). Taylor said some cities, but not all, pay into Social Security for their police and fire employees to make up for that.
“The only place you get C.O.L.A. is Social Security,” he said. “To not pay Social Security is almost criminal, in my mind.”
Both plans have no service length requirement if an employee becomes disabled in the line of duty. The current plan requires a minimum of five years’ service if the disability is the result of a non-duty incident.
In either case, the current plans pay 60 percent of the employee’s monthly salary at the time of the injury. There is no cap on earnings from other employment if the person became disabled in the line of duty, Taylor said. If not, once a person makes $7,500 or more in a month, the disability benefits are reduced.
“The new plan changes that significantly,” Taylor said.
Under that plan, someone can only qualify as disabled if they cannot work as a police officer or firefighter or qualify for other “significant, gainful employment.”
For a duty-related disability, the benefit payments amount to 90 percent of the last 12 full months’ average salary. For non-duty-related disability, it’s 66 2/3 percent.