Details revealed in a recent pension fund analysis do not meet the criteria set by the mayor when he established a task force to study the issue, an official says.
Chris Wilmore, president of the Chattanooga Fire and Police Pension Board, responded Thursday afternoon to an analysis that considers the financial impact on the public safety retirement system if benefits were rolled back to 1999-era levels.
"We were extremely disappointed with this scenario," he said. "We felt that it failed on all four of Mayor [Andy] Berke’s goals."
Wilmore’s remarks come on the heels of a report that describes documents sent to task force members in November. The analysis and accompanying memorandums consider a different retirement plan than the one currently in place.
The scenario does not "provide a dignified benefit for retirees. It would undermine recruitment and retention. We would have an excessive number of experienced officers and firefighters leave—not just retirees, but people who have only been here a few years," he said.
"And it would be extremely inefficient on tax dollars because it would put public safety at extreme risk," he said. "This is a time when public safety is a high priority for all parties involved."
Among the changes reviewed in the scenario are an elimination of the deferred retirement option plan, or DROP; a 2 percent decrease in the cost-of-living adjustment; an increase in employee contributions; establishment of a retirement eligibility age; and a decrease in the multiplier used to calculate pension benefits for new hires.
Wilmore cited the elimination of the DROP and changes to the COLA as hindering the pension plan’s ability to provide its members a dignified retirement.
The COLA reduction would make it difficult for retirees’ benefits to keep up with inflation and would lower their purchasing power for food, medications and other necessities, he said. Removing the DROP would put more pressure on a retirees’ pension benefit to cover any outstanding debts he or she may have.
Wilmore pointed to a plan the pension board submitted in October as a more moderate course of action.
That plan also includes cuts to the retirement system.
It establishes a retirement eligibility age of 50 with 25 years of employment. Chattanooga police officers and firefighters can currently retire at any age after 25 years of service.
It raises employee contributions by 1 percent. Depending on when they were hired, employees currently contribute 8 or 9 percent of their base pay to the fund.
It reduces the COLA based on the plan’s market performance. The current COLA is 3 percent per year.
The board’s plan would also lower the amount the city pays into the fund.
Chattanooga’s fire and police pension fund has several revenue sources, most notably its investment portfolio, employee contributions and the city’s annual required contribution.
The city’s contribution is calculated annually as a percentage of fire and police payroll. If the pension plan stays on its current trajectory, the contribution level will reach 48 percent of payroll by 2038. Under the board’s proposal, the city’s contribution would reach 41 percent of payroll.
Chattanooga is currently expected to contribute $724 million to the pension fund over a 30-year period. The board’s plan would lower the city’s contribution by $126 million during that time.
Some of the key differences between that plan and the 1999-era scenario are how much the retirement system would change and where the burden of cost lies.
"There is middle ground in the pension board’s proposal," Wilmore said.
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