What Happened?
Facing a $420 million unfunded liability for its pensions and retiree health insurance, Cape Coral, FL, is exchanging a one-time employee bonus for approximately $50 million in pension reforms.
The Goal
A total of $1.8 million in bonuses will be given out to employees of the city. That one-time payment will be offset by what actuaries say is $2 million in savings for each of the next 25 years.
Devil in the Details
Employees provided the following concessions:
- No COLA for three years
- Annual pension payout cap of $95,000
- Service time increased to 27 years (from 25)
- Retirement age increased to 62 years (from 60)
Past Florida Reforms
Cape Coral previously bargained with its police union for $75 million in pension savings. Other cities in Florida have altered benefits to existing police employees, including Palm Beach’s effort to raise the retirement ages and Sarasota’s moves to cut COLA, and redefine how annual payouts are calculated.
Many Types of Reform
Across the country, cities are reacting to significantly higher annual pension costs in a number of different ways. In Phoenix, AZ, a ballot measure is asking voters to raise employee contributions from 5 percent to 20 percent. The mayor of Baltimore, MD is seeking a move to 401k-style plans from the current defined benefit plan.
An arbitrator in Pennsylvania recently ruled in favor of the city there to allow cuts in manning and overtime sick leave calculations.
Gov1 covers pension and disability reform on a regular basis.