Standard municipal pensions for top officials? Some say no
Updated 7:46 pm, Thursday, January 17, 2013
While the town continues to negotiate new contracts with unions representing municipal employees, a priority has been adding provisions to the pacts that bar newly hired workers from eligibility for town pensions, instead offering them retirement coverage through defined-contribution plans, such as a 401a.
The school nurses, Town Hall employees and Emergency Communication Center workers all have ratified new contracts that assign new employees to a 401a retirement savings plan, not the municipal pension plan. The firefighters' contract gives new hires the option of choosing between the two.
The push to limit the number of new employees eligible for pensions as a way to limit the town's long-term fiscal obligations, though, has raised the question of why the policy does not extend to all employees, including the first selectman.
First Selectman Michael Tetreau, elected to the town's top job in 2011, nonetheless is covered by the town's pension plan, as are all non-union employees, like his chief of staff, Robert Mayer, hired last year, department heads and other elected officials, such as the town clerk.
"I think we have had the department heads' benefits follow that of the mid-managers," Tetreau said, and the benefits of elected officials mirror those of department heads.
"It keeps it both apolitical and treats everyone consistently," he said, but added those benefits would eventually change as mid-managers' contract changes.
The latest contract for the mid-managers, whose bargaining unit is now known as the Professional and Technical union, has yet to be settled.
But Thomas Flynn, chairman of the Board of Finance, said he believes that town leaders -- particularly, the first selectman -- should set an example by switching to a 401a plan, no matter who has the job.
"I'm not opposed to doing an assessment of the first selectman's salary and benefits compensation if a switch is made like that," Flynn said, "but they should definitely take the lead, particularly when they are leading the charge for changes in union contracts."
Representative Town Meeting Minority Leader Hal Schwartz, D-7, said discussion of the pension versus a 401a plan has been going on for at least 10 years or more.
"But I believe that a 401a program for all new town employees, whether they are elected or hired, will in the long run be financially beneficial to the town," Schwartz said. "I also think the 401a for new hires should apply to all employees, union members or not."
He said he believes that eventually, all the town's union contracts will have the proviso for new employees.
"The first selectman and his office should be treated the same as all other departments and should follow the same rules," Schwartz said. "This way, politics stays out of the issue."
Flynn said he takes a different view of department heads. In those cases, he said, the department head should have the same benefits as those union members that he or she supervises.
"There's a lot of conversation about these plans," Flynn said. "I think absolutely there has to be an evaluation department by department."
Recently, town officials learned that several firefighters had received temporary transfers or promotions just prior to retirement that boosted their pension benefits. After at least 30 years on the job, police and fire can retire at 80 percent of their base salary at the time of their retirement.
But police and firefighters do not pay into Social Security, and their overtime and outside duty earnings are not included in pension calculations. Should they switch to a 401a, the town would have to pay Social Security on all of their earnings, as well as provide disability insurance.
"When it comes to police and fire, there has to be an evaluation on the impact to Social Security," Flynn said. "There needs to be an economic study."
And even with new municipal employees going into a 401a retirement plan, he said, financial savings won't be seen for at least seven or nine years.
"I'm not saying it's not a valid thing to do," Flynn said, "but be aware it might cost you money in the short-term to save money in the long-term. It's a very complicated subject."
There is a difference between 401k and 401a accounts. With a 401k, offered by private, for-profit companies, the bulk of funding is invested by the employee, with a possible match by the employer. The employer cannot require its employees participate.
With a 401a, offered by public institutions, most of the funding comes from the employer, and the employer can mandate that employees participate.
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