The Sedalia City Council took its first steps Tuesday at analyzing problems with employee pensions.
City Administrator Keith Riesberg compared firefighter, police and LAGERS (Local Area Government Employees Retirement System) pension plans in a PowerPoint presentation Tuesday night in Council Chambers. Riesberg said the mayor and City Council are the ultimate decision makers regarding employee pensions.
“The challenge with elected officials is they have to balance pensions with the different demands of the city,” Riesberg said.
The city administrator said, “There are no magical, quick-fix solutions” to problems with pensions created over several years.
“I don’t expect we’re going to have a solution to satisfy everyone in a short amount of time,” Riesberg said.
Some retired firefighters say their pension payments have failed to increase by 3 percent annually, a move needed to keep pace with the cost of living. Firefighters don’t pay into Social Security either, which means they receive nothing or less than other city employees, depending on how much the firefighter works outside the department.
Mayor Bob Wasson said problems with pensions among the departments “is not new” nor will it be “solved easily.”
“We’re kind of in a 100-yard race and we’re starting in the middle,” he said. “Be patient and work through this, and I think the end result will be acceptable and desirable. ... I’m glad everyone is here, and this is a good opportunity for us.”
Riesberg’s presentation included the number of employees covered by pensions, financial figures, age of retirement eligibility and years of service to become vested, survivor benefits, contributions of employees and the city, and Social Security and Medicare payments.
Among the differences between the pensions for firefighters, police and all other city employees is the amount of money the employee contributes. Firefighters pay in 7.5 percent of an indexed earnings base, which increases by 3 percent annually. In 2008, the base was $41,000, which means firefighters contribute about $3,075 each to their pensions.
Police officers contribute $15 a month. The city pays on the behalf of employees in the LAGERS.
Second Ward Councilman Joe Young asked if switching all employees to LAGERS would be better and if the city could feasibly pay for the change. Riesberg said it would be costly to go to a strictly LAGERS plan, and the police and fire departments’ pension boards would have to agree.
The Police Department’s pension board recently looked into joining LAGERS and found out it would require an additional $300,000 cash outlay to take care of retirees under the existing plan. The contribution rate for the department under LAGERS would also be about 25 percent of its payroll, or about $500,000.
“It’s not cheap to transition to that,” Riesberg said.
Another difference amongst the plans is that firefighters’ pension payments are based on half of the index earnings. Police and other city employees are based on a percentage of their salary at the time of retirement.
Riesberg said the council has several questions to address: Is there a problem with pensions? What changes, if any, are needed to achieve equity between the pension plans? And, how would any determined changes be funded.
Some council members asked for time to review the report, and requested more information about pensions including examples and a history of changes in pension plans.
Fire Department driver and engineer Matt Irwin said one of the challenges with firefighter benefits is that they don’t pay into Social Security. He said other employees receive the extra Social Security benefits at 65. Whereas, “When I retire, I have to get a full-time job and still need to get 30 more years making that index” required to draw full Social Security. This year, a retired firefighter would have to make $18,500 at a different job to count as one of the 30 years required to receive full Social Security benefits.
If Irwin retires at 43, after 22 years with the Fire Department, he would need to work until he was 73 when he “can retire and actually equal what I feel another employee is making when they hit 65.”
Irwin said he thought the presentation was a “wonderful first step, and it’s showing progress.”
“There is no easy way out of it; we understand there is no quick fix,” he said.
The council plans to talk more about pensions at its June 23 work session.