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									                                   March 15, 2013

      Statement from the Coalition of Retired Police and Fire Fighters (CORPF)
responding to PERA's recommendations to stabilize the Police and Fire Pension Fund,
as found in Senate File 447 and House File 618 of the Minnesota State Legislature,
February 14, 2013. The information below was presented to PERA on Feb 29. The
March 15 version includes updated information relative to 2013 salaries.
      The recommendations of PERA, as detailed in Senate File 447 and House File
618, are based on proposals of a working coalition of law enforcement and firefighter
representatives. This coalition was comprised essentially of members from various
groups (unions, professional associations, etc.) who are currently working. That group
does not represent retirees. Following are CORPF recommendations to the Legislature
referencing Senate File 447, and House File 618.

The bills incorporates the following changes:

    Increasing active members’ contributions by a total of 1.2 percent of salary,
     phased in over two years beginning in 2014. Thus, the current contribution
     rate of 9.6 would increase to 10.2 percent in 2014, and 10.8 percent in
     2015;

CORPS recommendation is to replace the above with the following:

Increase members contributions commencing July 1, 2013 to 10.6 percent of salary,
in 2014 to 11.6 percent, in 2015 to 12.6 percent, in 2016 to 14 percent.

(Explanation of reason for the CORPF specific recommendation, and not part of
the Files):

Who benefits from the pension? It is not the employer or municipalities, it is solely
the employee. It stands to reason the beneficiary should pay at least an equal
portion toward retirement.

The bills incorporates the following changes:

    Concurrently, increasing employer contribution rates by 1.8 percent,
     phased in over the same two-year period. That would take employer
     contributions from the present 14.4 percent of salary to 16.2 percent;

CORPS recommendation is to replace the above with the following:

Decrease employer contributions by .4 percent, to 14.3 percent commencing July 1,
2013, to 14.2 percent, in 2014, to 14.1 percent in 2015, and to 14 percent in 2016.
(Explanation of reason for the CORPF specific recommendation, and not part of
the Files):

The employer (governmental agency/tax payer) have their unfair burden reduced,
by having their contributions decreased. This would commence in 2013 and be
phased in over a period through 2016. This provides an equitable contribution to
that of the employee.

The bills incorporates the following changes:

    Capping initial retirement benefits at 99 percent of average salary
     (equivalent to 33 years of service) for individuals first enrolling in the plan
     after June 30, 2014;



CORPS recommendation is to replace the above with the following:



Capping initial retirement benefits at 80% of average base salary, excluding
overtime, premium time, bonuses, uniform allowances, paramedic or other
specialty skills premiums, etc. and any payments or monies received other then the
base salary. This provision is under the categories below specifying “Maximum
percent of base pay” and “Multiplier Used”. This averaging would be based on the
last three years employed and in the fund, and changes effective July 1, 2013.

Maximum percent of base pay (excluding overtime, premium time, bonuses,
uniform allowances, paramedic or other specialty skills premiums, etc. and any
payments or monies received other then the base salary) to calculate for retirement,
after June 30, 2013, as follows:
If 25 or more years in the fund on June 30, 2013, then 100% of base salary used to
calculate the benefit for retirement.
If 20 to 25 years in the fund on June 30, 2013, then 95% of base salary used to
calculate the benefit for retirement.
If 15 to 20 years in the fund on June 30, 2013, then 90% of base salary used to
calculate the benefit for retirement.
If 10 to 15 years in the fund on June 30, 2013, then 85% of base salary used to
calculate the benefit for retirement.
If less then 10 years in the fund on June 30, 2013, then 80% of base salary used to
calculate the benefit for retirement. Employees with less then 10 years in the fund
are not vested.
Multiplier Used for calculating pension benefits, as a percent of base pay (excluding
overtime, premium time, bonuses, uniform allowances, paramedic or other
specialty skills premiums, etc. and any payments or monies received other then the
base salary) effective July 1, 2013 be as follows:
If a member of the fund for 10 years or more on June 30, 2013, those years prior to
July 1, 2013
be at the rate in effect on June 30, 2013. Going forward from July 1, 2013, the
multiplier be at a rate as follows:
if a member of the fund 25 years or more, 3%,
if a member of the fund for 20 to 25 years, 2.9%,
if a member of the fund for 15 to 20 years, 2.8%,
if a member of the fund for 10 to 15 years, 2.7%,
if a member of the fund for less then 10 years, 2.5%,

Explanation of reason for the CORPF specific recommendation, and not part of the
Files):

Base salaries are often artificially inflated when used to calculate pension benefits
by including overtime, premium time, bonuses, uniform allowances, paramedic or
other specialty skills premiums, etc. and any payments or monies received other
then the base salary. End of career ballooning in compensations creates a strain on
funding pensions, and needs to be eliminated. The current method simply does not
represent the employees base salary, and a lifetime of benefits should not be
calculated on this inflated number.
Following are examples of capping the benefit at 80% of base pay, using 2013
salaries:
Fire Fighter STP    base pay $ 68,628 retirement benefit $ 54,902
Sergeant HCSO       base pay $ 82,632 retirement benefit $ 66,105
Lieutenant MPL PD base pay $ 94,612 retirement benefit $ 75,689

According to the Social Security Administration, in 2012 the average retirement
benefit was $14,760.
What reasonable person would expect, in 2013, to retire at age 55, with full
salary, between $68 and $94,000 or more, and most of it paid for by taxpayers?


The bills incorporates the following changes:

    Increasing vesting for members enrolled in the plan after June, 2014 to 50
     percent after 10 years of service, and increasing 5 percent each year
     thereafter to fully vested after 20 years of service;
CORPS recommendation is the same as in the existing SF 447 and HF 618
above:

Increasing vesting for members enrolled in the plan after June, 2014 to 50
percent after 10 years of service, and increasing 5 percent each year
thereafter to fully vested after 20 years of service;

The bills incorporates the following changes:

    Changing the early retirement reduction factor from 1.2 percent per year
     (2.4 percent for post-June 2007 members) to 5 percent per year. This
     would be phased in over 5 years starting July 1, 2014 (click here for more
     detailed information and an early retirement calculator);

CORPS recommendation is to replace the above with the following:

Changing the early retirement reduction factor from 1.2 percent per year to 1
percent per month, starting July 1, 2013.

(Explanation of reason for the CORPF specific recommendation, and not part of
the Files):

The lack of a meaningful “early retirement” deduction, coupled with the increased
life span of individuals, has a detrimental impact on pension funding. Individuals
could retire at an early age, with a substantial retirement (exacerbated by “pension
loading”). Often these individuals continue working in another capacity. Many
“early” retirees are not in fact in retirement, but merely leave one employment for
another. Retirement benefits are to provide income for those no longer working.
The lack of a substantial reduction factor encourages early retirements and
negatively impacts the stability of the pension fund.

The bills incorporates the following changes:

    Setting benefit recipients’ annual increases at 1 percent until the plan is
     back to 90 percent funded;

CORPS recommendation is to replace the above with the following:

Maintain the current benefit recipients' annual increases to the formula established
and current in 2012.
(Explanation of reason for the CORPF specific recommendation, and not part of
the Files):
Pensioners in 2013 are scheduled to receive a 1.5% increase in benefits. The
inflationary rate in the US for 2012 was 2.07%. This means at 1.5% pensioners are
receiving 37% less then inflation. HF 618 and SF 447, PERA's proposal, would put
their increase at 50% less then the inflation rate.
Under PERA's recommendations, as found in SF 447 and HF 618, it could take 20-
30 years for 90% funding. This could mean many retirees will never receive more
then 1%, falling farther and farther behind inflation. They are paying ,through
their losses, for a benefit only working members would receive.
Many pensioners are at the end of their work life. They do not have the
opportunity to decide to keep working, work overtime, seek a promotion, etc. They
are locked in economically and are on a nearly fixed income, in fact at 1.5% they
are going backward. To have there minimal benefit increases reduced even further
is both unfair and unforgiving.

The bills incorporates the following changes:

    Delaying the first retirement increase paid to new retirees for three years
     (two years beyond current law)

CORPS recommendation is to replace the above with the following:

For newly retired members, a one year waiting period for any benefit increases.

(Explanation of reason for the CORPF specific recommendation, and not part of
the Files):

Future retirees are subject to inflationary costs and would be needlessly penalized
by not receiving benefit increases after one year.

The purpose of this statement is to bring to the attention of the Legislature input from
retirees, in addressing the Police and Fire pension funding shortfalls. We believe
Senate File 447 and House File 618, as they currently exist, do not adequately address
some elements of those shortfalls. Failure to use base salary for pension benefit
calculation, end of career salary spiking (pension loading), and failure to provide a
substantial reduction for early retirement are some examples.

The Police and Fire Fund is over the fiscal cliff. A short while ago it was 100%
funded, and now it is at 78%. Meaningful and equitable changes need to be made. It
is essential the Police and Fire Pension Fund remain healthy,. We hope our efforts
help provide solutions to some of the major contributing factors, more equitable
funding, and some general taxpayer relief.

								
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