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CML Newsletter
June 21, 2019

By Kevin Bommer, CML executive director


In 2018, the Fire and Police Pension Association (FPPA) Board of Directors voted to direct staff to prepare a legislative request for an increase in employer contributions by 4 percent. The vote was later reconsidered after significant outcry from CML, municipalities, fire districts, and at least one fire protection authority — some of which has just completed irrevocable affiliation with the Statewide Defined Benefit (SWDB) plan.

In lieu of the request for state legislation, the Board created a task force of employer, employee, and other representatives to examine the long-term funding of the SWDB plan, as well as the funded status of and challenges for the Statewide Death and Disability (D&D) plan. While the pension plan is nearly 100 percent funded, the D&D plan has slipped below 80 percent and is going in the wrong direction.

CML Executive Director Kevin Bommer was a member of the task force, having been responsible for lobbying pension issues since starting at CML nearly 20 years ago. The group began meeting in November 2018 and concluded its last meeting on May 29. Recommendations to the FPPA Board from the task force were voted on. CML voted for a recommendation on what Bommer believes is the most critical issue — the declining funded status of the D&D plan — and against the recommendation for the SWDB plan that calls for an employer contribution increase of 4 percent over 8 years and transferring authority for future contribution increases from the legislature to the FPPA Board.

At its most recent meeting, the FPPA Board directed staff to draft legislation to present to the legislature's interim Pension Reform Commission. That interim committee is responsible for oversight of FPPA and the Public Employees Retirement Association (PERA), and it can sponsor and directly introduce bills in the 2020 session. 

If adopted by the interim committee as proposed by the FPPA Board, legislation in the 2020 session will include the following:

Statewide Defined Benefit Plan
• Require a 4 percent employer increase over 8 years, with the ability of the FPPA Board to further increase the required contributions equally between employers and employees.
• Provide for a normal retirement as early as age 50, if a member's combined years of service and age equals 80; with a corresponding 1 percent increase in employer contributions, to be implemented subsequent to other employer contribution increases, if any.
• Convert separate retirement accounts to defined contribution accounts.
• Authorize the FPPA Board to reduce the re-entry continuing uniform rate of contribution to allow credit for employer and member excess re-entry contributions toward the proposed increased contributions.

Statewide Death & Disability Plan
• Allow the FPPA Board to adjust the required contribution rate by up to 0.2 percent per year.
• Seek state assistance in funding the unfunded liability attributable to members who were enrolled prior to 1998.

As it relates to the SWDB, the main issue for employees has been the lack of annual cost of living adjustments (COLAs) for retirees. Unlike PERA, COLA adjustments for FPPA retirees are discretionary to allow the FPPA Board to ensure the plan remains actuarially sound. In the past decade, employees sought legislation allowing for a plan election among employees to increase their employee contribution so that they might have a chance of annual COLAs. The legislation was passed, and a subsequent plan election was narrowly approved to increase employee contributions 0.5 percent year for 4 years, until employees are contributing 12 percent. 

Not too long passed before the FPPA Board reduced the plan's actuarial assumption from 7.5 percent to 7.0 percent, which essentially eliminated the likelihood for the Board to be able to grant COLAs for the foreseeable future. Combined with some other long-term concerns, the stage is set for legislation that will drive up employer contributions and transfer the authority for future hikes to the FPPA Board.

These actions merely set the stage for what will be a robust discussion when the Pension Reform Commission meets later this year. A date will be selected between August and early October and may include more than one meeting. For more information, please contact Kevin Bommer at kbommer@cml.org. Information on the FPPA Board and its members may be found at www.fppaco.org/board.html

 

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