New DROP Plan To Apply To New Hires; Board Restructured
posted August 22, 2008
A compromise plan to modify the City Fire and Police Pension Fund that city officials said by one estimate is $95 million underfunded was approved Friday afternoon.
Current sworn fire and police employees can keep the current DROP plan and increase their contribution rate from 8 to 9 percent, or they can base their pension on a final average earnings at the beginning of their DROP period.
Officials said they will devise a DROP plan for new hires that is "cost neutral."
Also, the makeup of the pension board will change with the addition of a city employee named by the mayor and a citizen named by the City Council with input from the pension board. There will also be three members each from the fire and police.
Frank Hamilton, pension administrator, said, "I’m pleased to see that the Pension Review Committee voted to adopt the basic framework of the mediated document that Councilwoman Carol Berz helped develop. Our goal has always been to find a solution that protects the Pension Fund and member benefits while addressing the city’s concerns.
"We look forward to working with City Council members to finalize these changes to the Pension Fund."
Despite the accord, there was continued discord at the afternoon session of a task force set up to deal with concerns on higher city contributions to the fund and the issue of it being underfunded.
Investment advisor Todd Gardenhire said the pension board had been derelict in not making changes when it got out of kilter. He said, "Somebody should have stood up and said, 'Hey, guys, we need to do something about this.'"
He said there should have been an independent investment expert on the board.
Dan Johnson, the mayor's chief of staff and the chairman of the task force, said, "Probably no board has more conflicts than this one."
He said the board is overseeing a quarter of a billion dollars without any financial expertise.
Mr. Johnson recommended that the board give more sayso to retirees, saying, "All the stakeholders need a voice."
Daisy Madison, city finance director, said the DROP plan was put into effect and approved by the voters in 2000 to encourage older officers to retire to make way for younger personnel to take leadership posts. She said it eventually caused the retirement of those the city would have liked to have retained for a longer time.
Mr. Johnson said before the DROP plan was put in, the fund had a surplus of over $12 million. He said the city contribution rate has risen to 23.46 percent.
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