Currently, the retirement payment is calculated based on the employee’s highest pay rate for 36 consecutive months, the employee’s number of years working for the city and a “multiplier” of 2%. Administrators of the Denver Employees Retirement Plan on Wednesday recommended reducing the multiplier to 1.5%, the Denver Post reported.
City officials say they need the pension formula change because, like pensions across the country, the plan suffered from falling investments returns in 2001 and 2002.
Don Cole, assistant Plan executive director, recommended the change for workers hired on or after July 1, 2004. Cole estimated that at the end of 2003, the plan had 97.9% of the assets needed to pay retirement benefits – a shortfall of about $34 million.
City Councilwoman Jeanne Faatz wants the city to also consider capping or eliminating the amount of accrued vacation and sick-leave time that can be added to the employee’s final salary. Currently, city workers can amass up to 896 hours of unused vacation and sick-leave time, which is then added to the worker’s pay to determine the pension payment.
Based on 2002 figures, the average worker with 20 years of service would get a pension of $1,700 a month if sick leave and vacation time were not factored in. The current practice of adding the average accrued sick and vacation payoff of $12,000 in the calculation of retirement benefits boosts the monthly pension payment by 8% to $1,833, the newspaper said.