Because of the rising costs of the city’s police and fire pension plan, City Council Chairman Trent Fellers says he would like to see a committee appointed to look at all aspects of the plan.
“I think we gotta solve this,” said Fellers after the council officially received the annual pension plan report showing the city has an $88 million unfunded actuarial liability.
“If we don’t solve it, we are setting ourselves up for having a greater bill,” he said.
The city will have to raise its two-year funding for the police and fire pension plan from around $14 million to more than $18 million in order to meet the latest actuarial recommendations.
Mayor Chris Beutler is still in the early stages of budget review for the second year of the two-year budget cycle and has not made a decision on whether to increase city funding for the pension plan, according to Rick Hoppe, Beutler’s chief of staff.
City Council members on Monday were given the latest actuarial report on the defined benefit plan that guarantees firefighters and police officers a monthly pension based on their retirement salary.
The city’s costs for the defined benefit pension plan have grown dramatically since the 2008 stock market crash wiped out about one-third of the pension fund assets.
Fellers has been talking privately about creating a study committee, like the one set up by Beutler to look at how to pay for the purchase of a new police emergency radio system and four fire stations.
The defined benefit pension plan is expensive, Fellers has said. For every dollar the city pays firefighters and police officers in wages, the city has to kick in another quarter for pension costs, said Fellers, pointing to numbers in the latest actuarial report.
Fellers said Monday he is still interested in creating a pension study committee but he needs to talk with the mayor’s staff and with fellow councilmembers to determine how a committee would be structured.
Fellers said the committee should look at all aspects of the city pension benefit, from how best to fund it to whether it should be ended.
The defined pension plan benefit is covered by the union contracts and cannot be changed or ended without union agreement.
Only police and fire employees have a defined benefit pension plan. Other city employees have a defined contribution plan, much like private company 401k plans, where the employer contributes a specific percentage every month but doesn’t guarantee a monthly benefit at retirement.
Firefighters and police officers do not participate in the federal Social Security system but rely entirely on the city pension plan.
Milliman Inc. looks at the city pension fund at the end of August every year for an annual report.
This year the city changed some of the assumptions used to determine how much money will be needed to fund pensions in the future, including reducing the assumed investment returns to a more realistic 6.75 percent annually and changing to more recent mortality tables that indicate people are living longer.
The assumptions increased the amount of money Milliman believes the city should set aside to make sure the plan is sound and will be able to pay for future pension benefits.
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