Four Options For Salvaging New Orleans Firefighters Pension Fund All Rejected

Months of analysis and negotiations over the fate of the New Orleans firefighters pension fund appeared to crumble Monday night, as union and retirement system representatives rejected a set of options put forward as ways to fix the ailing system.

Firefighters jeered and, in some cases, crumpled sheets of paper laying out the details of four different plans developed by a nine-member task force put together by Mayor Mitch Landrieu.

The firefighters’ ire was particularly directed toward proposals that they abandon suits that could force the city to pay more than $175 million toward the pension system. Instead, they would have to accept reductions in benefits, higher contributions into the system or both.

“I don’t see where it’s incumbent on us to make huge concessions. My inclination is to go with the judgments the courts have already determined,” firefighter Joe Fincher said.

The group has been meeting since the fall to try to hash out a compromise between City Hall and the firefighters, with help from the New Orleans Business Council and a group of consultants. While initially aiming to reach a consensus among all those groups, the task force found that goal elusive and ended up presenting four different options.

However, none of the proposals managed to win unanimous support, a condition for them to be recommended by the task force.

Representatives of the firefighters voted as a bloc for an option that called for full payment of the court judgments, while representatives of the business group and the city opposed it. Each of the other plans was supported by the city and most or all of the business representatives but was opposed by the firefighters.

The pension system, which has been considered underfunded for years, now has essentially no assets when the amount it owes to firefighters taking deferred retirement is taken into account, consultant Eric Atwater said at the meeting.

Because its funding is so low, the roughly $60 million the city pays toward the retirement system each year essentially goes straight to paying pensions for already retired firefighters, rather than toward investments that could offset future costs.

For years, city officials and the firefighters union have traded accusations about who is to blame for the fund’s troubles.

Officials had hoped the negotiations would lead to a single plan to be presented at the task force’s final meeting. Instead, four options were presented.

All sides appeared to have agreed on several ground rules, including that no benefit increases, cost-of-living adjustments or so-called “13th checks” — essentially a bonus payment offered by the pension system in the past — would be allowed until the system is 80 percent funded.

Also, the existing makeup of the pension fund’s board would be left as is, an important issue in determining which side has the most direct control of the system. Right now, the board comprises four representatives of current and retired firefighters, two members of the Landrieu administration and a mayoral appointee.

But the details of the plans themselves were hotly contested, particularly as several would have required the firefighters to relinquish their rights in a pair of lawsuits they have successfully brought against the city.

One, known as the mandamus judgment, says the city has historically underfunded the pension system by about $26 million. The other, known as the longevity suit, accuses the city of failing to provide legally required raises to firefighters and, as a result, putting too little money into the system to fund their retirement. The value of that judgment is disputed but is somewhere between $75 million and $150 million.

All but one of the options would have reduced or eliminated the city’s liability in those cases, something that firefighters union President Nick Felton said was unacceptable.

“Mandamus given up? Longevity given up? Those are not an option in my book,” Felton said. It adds “insult to injury” that some of the plans called for the firefighters to drop their claims while also taking steps to increase their contributions or limit some of their retirement benefits, he said.

The first reform option — the one supported by the firefighters — would have left the existing benefit structure in place, though making some changes to the rules governing deferred retirement options. The city would have been required to pay the entire amount the firefighters say they are due in the two judgments. The plan also would have eliminated a provision that allows firefighters to collect the full amount of available disability and retirement payments at the same time.

Overall, the proposal would have increased the city’s contribution to the system by $28.1 million in 2016.

A second plan would have increased the rate at which firefighters accrue pension benefits but left their retirement age the same. It would have allowed for increased contributions into the system from firefighters if the statewide firefighters pension system mandates an increase for its members. The city would not have had to pay the court judgments if the other parts of the plan were followed.

That option would have required the passage of a 2-mill tax to fund the system, with the tax ending after 2021. Overall, it would have increased the city’s payments by $6.5 million in 2016.

A third proposal would have increased the amount firefighters pay into the system by 1 percentage point of their salaries per year in 2017, 2019 and 2021. It also would have altered the rule on disability benefits, and those savings to the city would have gone toward paying the city’s required contribution to the retirement system.

That plan also called for a 2-mill tax hike and would have increased the city’s payments to the retirement system in 2016 by $6 million.

The final proposal would have been similar to the previous plan but would not have involved a millage increase. That plan would have cost the city about $4.1 million more in 2016.

From The New Orleans Advocate

More from The Latest News.