Town takes closer look at pensions
Published 6:05 pm, Wednesday, May 4, 2011
At the end of June 2010, the New Milford Police Department said farewell to seven veteran officers, an unprecedented number of retirements for any of the town's public agencies.
The seven and their years of service -- Chief Colin McCormack (29); Deputy Chief Norbert Lillis (43); Capt. Michael Mrazik (29); Investigator Larry Lynch (38); Investigator William Kaminiski (26); officers Jerome Dombrowski and Donald Woods (each 27) -- added $418,000 to the $1.45 million in annual pension payments paid in 2009-2010 to 186 retired employees.
Pensions range from $53,000 to $109,000 a year.
Town finance director Ray Jankowski said no one disputes these officers deserve what was promised, to attract and keep high-caliber employees when town salaries were far lower than those paid in the private sector.
Yet the fiscal impact has left citizens and leaders wondering how to reward valued employees in the future without breaking the bank.
With the late retirement benefits offered to all town employees, some of the recent retiring police officers were able to earn more than 80 percent of their top salary, calculated as the highest pay from three of their last five years.
Other employees' final salary is calculated based on the highest pay from five of the last 10 years.
The most veteran of the officers who retired last year -- Norbert Lillis, 69, who worked 18 years beyond his retirement eligibility -- earns a yearly pension about $24,000 more than his top salary of just over $85,000.
Former Chief McCormack's pension is about $90,000; his annual salary was just over $104,000.
Of the town's multiple, defined benefit pension packages, covering everyone from highway workers to school secretaries -- only the school district's certified faculty, who pay into a state retirement program, are not included -- the police department has the most lucrative package, according to town leaders. The current pension expires in June and is now under negotiation.
The police pension today is the only one with a 25-year service rule, the only one that incorporates side-duty jobs into the final pension calculation, and the only one that incorporates medical benefits for the officer and spouse until Medicare eligibility, with a 10 percent employee contribution, officials said.
The police pension has the highest multiplier used to calculate the final pension package, with the range for all town pensions between 1.3 percent and 2.5 percent of the final salary multiplied by years of service.
The police pension requires each officer to contribute 6 percent of his income annually -- the highest paid by the town's public employees. The lowest is 3 percent.
The other employee pension plans use a rule of 84 or 85, whereby an employee's age and years of service -- not less than 10 -- are totaled to determine pension eligibility, Mr. Jankowski said.
"The philosophy in the public sector right now is to somehow minimize the impact of defined benefit" pension programs, he said.
He and other town leaders are leery whether defined contribution plans, such as 401(k) plans, make sense for municipalities.
"There is a misconception that (direct contribution) will provide short-term financial relief, and it won't,'' Mr. Jankowski said.
The town would still have to pay direct benefits to current employees as it phased in the contribution program, which would likely have a match of at least 7 percent, he said.
In 1998, Mr. Jankowski said, town leaders explored the idea. The cost then was estimated to be an additional $2 to $3 million.
Police union steward James Mullin said he has reservations about direct contribution pension plans, because there tends to be more financial risk with those programs.
As for his department's plan, the 24-year veteran said the union has worked with the town over the years to produce salary and benefit packages adequate to attract and retain career-minded candidates willing to accept the sacrifices that come with police work.
The pension package, negotiated separately from the salary and benefit package for all of the department's officers has clearly evolved into one of those incentives.
The first town pensions were established in 1964 for police and highway employees.
Officer Mullin said he admires New Milford, which he said has properly funded the pension account, unlike other cities and the state, which have borrowed money against their pension funds for operating expenses
The town pension account is now about $34 million, with town funding at 86 percent.
"The pension plan is healthy,'' Mr. Pilla said.
Unlike the state government, which "kicked the can down the road and is now at the intersection'' where they have to borrow to pay pensions, Mr. Pilla said New Milford has shown fiscal responsibility in meeting its pension expenses without a major hit to taxpayers.
He advocates reviewing the various pension plans to see where improvements might be made, but he also does not favor switching to a contribution plan.