Skip to comments.City Pays Pension and Benefits to Almost Twice As Many Retired As Current Workers
Posted on 07/03/2012 7:57:57 PM PDT by MichCapCon
Allen Park is well known for the fiasco surrounding a failed $30 million movie studio the city government got involved in, but that's only part of the problem.
Allen Park also is being held hostage by a pension and a retiree health insurance program that is only a dream to people who work in the private sector.
Typically, Allen Park's government union workers retire in their 50s, earn close to full salary with mid-career overtime loading, and get lifetime health, dental and vision care for themselves and their dependents for no more than $1,100 a year, according to city documents.
The city is trying to reform the health care package but retirees are threatening to sue.
Allen Park, however, may have some leverage on health care. The city's charter gives the city the right to modify its retiree plan as long as it provides another comparable one.
The city says it could save at least 18 percent on its annual $3.73 million retiree health care bill by getting retirees to pay up to $25 more on their prescription co-pays. Currently, the maximum co-pay on drugs for most retirees is $5. Allen Park also is trying to get retirees to pay a $20 copay on office visits and $150 for emergency room care.
"Not only could this plan save the city over $1.5 million a year, there is the added benefit of behavioral change," said Veronica Poremba from Advisors Financial Group, the agency that put together the new plan, adding that higher co-pays discourage unnecessary care.
The city is hoping to also get some control on retiree health care costs because there is none when it comes to promised pensions. Pensions are liabilities that can be enforced by courts. If a city runs out of money, a judge can order taxpayers to pay more.
Right now, Allen Park has moved to a defined contribution plan for new employees, similar to a 401(k) plan, but police and firefighters are exempt. Police and firefighters make up the largest percentage of the city's staff.
The city charter allows the city to "provide a board of trustees to independently administer the retirement system," but there is debate about the word "independent."
Five people sit on the board a person appointed by the police and fire departments, a person appointed by the citys other union workers, a person appointed by the mayor, the city financial director and a retiree.
"Our role is not to make changes to contracts; we don't make those decisions," said Ellen Templin, who represents the city's union workers.
In its most recent year, Allen Park paid $6.9 million dollars for pensions, which represents nearly half of the citys proposed operating budget. The city pays pensions out of a separate fund, but ultimately the money comes from taxpayers.
Nearly half of all retirees collect more than $30,000 a year, according to city documents. The top pension earner collects $81,660 annually, or $2.04 million over a 25-year period. Police and firefighters can ramp up their pensions by accumulating overtime shortly before they retire. Their contracts allow them to average the best three out of their previous 10 years of work.
In 2008, employees collected nearly $346,000 in overtime. One employee had an overtime bill of $8,680. He is now collecting a pension check of $6,427 each month.
The city employs 115 people. It pays pensions and benefits to 229 former workers.
Declare bankruptcy and screw’em. I’d be moving out of that city anyway.
Maybe the problem ISN’T the young people.
How the heck are we going to pay for these pensions?
Allen Park's government union workers retire in their 50s, earn close to full salary with mid-career overtime loading, and get lifetime health, dental and vision care for themselves and their dependents for no more than $1,100 a year, according to city documentsWell, there's yer problem!
Given increasing longevity, I would expect retiree's to outnumber active employees -- that to me is not surprising and should be planned for.
The problem I see with Allen Park is that their retirement benefits plan was apparently poorly conceived, poorly managed, poorly funded and over-promised/over-committed.
Love this: “If a city runs out of money, a judge can order taxpayers to pay more.”
I don’t understand why the Judge just doesn’t order the City to plant a couple of those money trees outside of City Hall.
Any long term retirement program will eventually end up paying two to four retired workers for every person actually working. This is because of a series of design faults.
Any retirement program that becomes vested in less than 40 years will result in multiple retirees per active worker. Do the math for a 30 year program: Worker one starts at age 18 retires at age 48 dies at age 80. At his death he has a fellow retiree, his replacement, age 50 who has been retired for 2 years. Now, how many people work for a 30 year retirement? When you do the math for a 20 year retirement you end up with two active retirees by the time the first employee retires.
Any retirement program that has a disability retirement clause has even a worse retiree to active worker ratio.
And the whole program goes down the toilet when businesses, governments are very poorly run businesses, elect to cut costs by reducing employees.
The you have to add extended life expectancies to the mix. Extend the “average lifespan 10 years and things get worse. Thrown in a long time survivor and ....
BTW - All of this was well known in the 1930s. Why else was Social Security's initial retirement age set at 65? At that time the average life expectancy was 75. Even without World War II’s impact a significant number of initial Social Security “contributors” were expected to die without ever drawing a single red cent.
Same tyranny goes on in NYS. Unless we declare bankruptcy we are headed to collapse.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.