Thursday, May 5, 2016 12:07 am
Pension board asks judge to solve retirement riddle
Benefits for city firefighters at stake
At issue is holiday pay for firefighters, which has historically been included in calculating pension benefits.
Firefighters get paid for eight hours on holidays, regardless of whether they work. Those who work get paid double time in addition to the eight hours that everyone receives, and that double-time pay is used to calculate pension benefits, increasing the size of checks for retirees. It’s been that way going back to the 1990s, but questions arose after Mayor Jim Langfelder took office last year.
The mayor has been pushing the board to stop using holiday pay in calculating retirement benefits, to the point of suggesting that the city, concerned about costs, might sue. The board, which has resisted ending benefits based on holiday pay, has beaten the city to the courthouse with a lawsuit filed last week in Sangamon County Circuit Court, asking a judge for a ruling on whether it should continue granting retirement benefits based on holiday pay.
In the lawsuit against the city, the board notes that the state Department of Insurance, also a defendant, has provided different interpretations of the law in advisory opinions issued to the board. The first opinion came in 1998, when the department said that holiday pay was salary and so could be included in calculating retirement benefits. The Department of Insurance raised concerns after a 2007 audit, but took no action after the pension board sent the department a copy of the 1998 letter from the department stating that pension benefits could be based on holiday pay.
After Langfelder took office last year, the department last August issued a second advisory opinion stating that holiday pay, contrary to the department’s 1998 opinion, should not be included in calculating retirement benefits. Don Craven, attorney for the pension board, said that he asked for the opinion last summer after Langfelder asked the board get a ruling from the department.
The board requested yet another opinion from the department last fall. Craven said he asked the department to weigh in again because he wanted to know the rationale behind the department’s earlier stance reversing the 1998 opinion. The department responded last November with a letter stating that holiday pay was akin to overtime pay so could not be considered when calculating retirement benefits. The department also said that benefits could not be retroactively stripped from retired firefighters. The pension board subsequently voted to end the benefit for new hires, but not for firefighters already on the force.
City budget director Bill McCarty, who sits on the pension board, said that the board shouldn’t include holiday pay in calculating pension benefits for any active firefighters. He said that he recently pegged the cost of the holiday-pay portion of retirement benefits for three recent retirees, all of whom are in their 50s, at $385,000, assuming the three retirees live to age 82. The benefit, he said, could ultimately cost the city millions of dollars if the board keeps awarding it to active employees upon retirement.
McCarty has voted against granting pensions to firefighters that include payments based on holiday pay. The board, he said, should refund to firefighters the amount they’ve contributed toward the holiday-pay portion of their pensions and cease giving holiday-pay retirement benefits to any new retirees, regardless of when they were hired.
“We’re having a hard time funding our operations,” McCarty said. “My personal interest in this is just making sure the law is followed. If the law allows for this payment, so be it. … I believe that the city and Department of Insurance are in the right on this.”
Craven said the board was likely going to get sued no matter what it decided – either by the city if it continued granting pensions based on holiday pay or by the firefighters’ union if it stopped.
“Being that we’re going to get sued either by the city or the firefighters, we decided that the prudent thing to do was to ask a court what to do,” Craven said. “We’ve got people screaming at us from both sides.”
Contact Bruce Rushton at email@example.com.