Houston & Fire Pension Board Tangle Over Pension Reform

Pre-65 retiree healthcare benefits will be reinstated in Memphis. fire pension board. Considering defined contribution retirement plans.
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Houston’s mayor and fire pension board are negotiating language in a pension reform deal that could prevent the city’s bankruptcy.

Houston Mayor Sylvester Turner and the Houston Firefighters’ Relief and Retirement Fund Pension Board have been working together on legislative language for pension reform. But the conversation has reached a sticky point because the mayor wants to move forward, and the fire pension board is not ready to.

As reported in the Houston Chronicle, the fire pension board recently cancelled a meeting, saying that significant work needs to be done before a final deal can be reached. The pension board passed a motion that it would continue to negotiate language with the city.

The mayor said the city would move forward, and according to the Chronicle, city officials have accused the board of dragging its feet on a solution to a problem that could bankrupt the city.

“We don’t feel the same time constraints that they do,” said David Keller, Jr., fire pension board chief, responded.

Pension Optimism Fizzled Since Historic Start

Back in October when the Houston Firefighters’ Relief and Retirement Fund agreed to draft legislative language for a pension reform proposal by Turner, the recently elected mayor was elated to have brought all three of the city’s pension systems into discussions.

The city is facing $7.7 billion in unfunded liabilities, and the proposal for the fire fighters’ fund would help to reduce that number by issuing pension obligation bonds and reducing benefits.

Their agreeing to come to the table was a good thing for the city, considering the city sued the pension fund in 2014 on the grounds that the state law excluding the city from the fund’s financial matters is unconstitutional. The Texas appeals court ruled against the city’s claim.

After they agreed to talk, Turner held a press conference and issued a news release, indicating that a solution to the $7.7 problem was in reach.

“This is a special moment for the city because it represents the first time ever that all three pension systems have come to the table and worked in a productive manner. Everyone is on the same page, and we are moving forward as a united front. We’ve all known there would have to be changes. I wish it had happened 15 years ago. It did not; so it is up to us to make it happen. This plan takes the issue off the table for good,” said Turner.

The city council followed the announcement by approving the pension plan unanimously, according to ABCNews.

Reform Decreases Could Be Felt More By Older Retirees

The pension reform plans suggests a formula for:

  • Increased employee contributions
  • Decreased cost of living adjustments (COLA)
  • Phasing out how retirement funds might accrue while a police officer or fire fighter collects a post-employment paycheck
  • Ending additional benefits, such as adding overtime into retirement pension pay calculations

While the mayor’s plan has broad support among the city council and various constituencies, not everyone is in favor. Public safety retirees’ COLA increases will be based on inflation rather than the current compounding 3 percent, and municipal retirees would get 1 percent, according to the Houston Chronicle.

Currently, police officers and fire fighters that provide more than 30 years of service may retire with $1 million in cash in a deferred retirement account, or collect pensions worth more than 90 percent of their pre-retirement salaries.

But not those that retired prior to 1997. An actuary that served the cities pension programs said it was the two decades of compounding 3 percent COLAs that resulted in what he called benefits that are “unreasonably generous.”

Houston firefighters and groups affected posted their concerns on social media, according to the ABC affiliate.

Some police officers have left the law enforcement department.

Read more about Houston’s pension reform details on the Houston Chronicle’s website.

Hear Keller discuss the perspective of the Houston fire pension board in September 2016:

Read more pension news:

What’s the Latest in the Game of Pension Hot Potato?

Reformed Public Pensions Can Still Be Generous

Dallas Faces Pension-Led Bankruptcy from Police & Fire Pensions Request

Memphis is Buzzing About Retiree Healthcare Subsidies

 

About the author

Andrea Fox

Andrea Fox

Andrea Fox is Editor of EfficientGov.com and Senior Editor at Praetorian Digital. She is based in Massachusetts.