According to the Tampa Tribune, for the past two years employees contributed 11% of their paychecks to make up for investment losses of around $319 million to their pension fund. Now those losses have been recovered and employee contributions will drop to 1.18% of pay. The city’s contribution will drop from 14.96% to 1.57% of payroll, according to the news article.
Not only are current police and fire employees paying less toward their retirement, but their benefits will increase, thanks to a 2003 labor contract. According to the Tribune, the contract increases the multiplier for benefits from 2.5% of pay to 3.15% of pay for each year of service for anyone employed as of October 1, 2003. This means an employee earning $60,000 after 20 years receives a pension about 26% higher than a similar employee who retired before that date, the Tribune points out.
Current retirees who are suing the board over accounting practices and how the board handled investment losses in 2002 and 2003, want to know how employees paying less into the system can earn larger pensions. Larry Vincent, president of the Tampa Retired Fire and Police Association, said he contributed about 13% of his pay each year to the pension fund between its inception in 1969 to his retirement in 1984. Current retirees feel they paid much for the benefits they now receive.
In the lawsuit, the retirees say money from a separate account earmarked for their cost-of-living allowances was improperly moved to the base account that pays pension benefits. The Tribune reports that, in the past, investment losses were absorbed in the base account and later made up through contributions and earnings, but “unprecedented” losses concerned the board. So, the board decided to spread these losses across both accounts, divvying a loss of $110 million to the base account and $210 million to the cost-of-living account.
The retirees say this action goes against individual contracts each employee receives regarding pension benefits as well as a 1979 lawsuit about a similar situation in which it was ruled that the cost-of-living account can not be “negatively adjusted”. The retirees want either the $210 million restored to the separate account or included in the new multiplier.
The Tribune reports that a liability study performed by Mellon offers up a couple of scenarios for the retirees’ cost-of-living account. In one, the assets could grow from $557 million to $664 million in 20 years. The other estimates a five to 10% probability that the assets will disappear by 2021.
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