2009 Open Enrollment Info.
Letter about Pension System.
The Sun's editorial on retired city police and firefighter benefits is factually wrong and incredibly mean spirited. Let's start with some basics.
All City employees, except police and firefighters, earn for their years with the City both a City pension benefit and Social Security. Police and firefighters do not. The only pension benefits they get for their years with the City come from the Fire and Police Retirement System, which is funded in part by their own contributions. Under this System, instead of getting cost of living increases annually in retirement like other City employees, and most other workers in the country, including employees at The Sun, Baltimore police and firefighter retirees only get an increase when the investment return from their Retirement System is greater than the actuarial r equirements for the year. Even then, only a portion of the excess goes to the retiree increase. The City gets the benefit of the rest to reduce its cost for that year or future years.
This model has worked well for the City from a cost perspective. In 2009, for example, Social Security retirees will get a 5.8% increase in their pension benefits. Retired police and firefighters will get no increase. Their Retirement System did not have excess investment returns for the year. Simply giving the police and fire retirees the same 5.8% increase as Social Security retirees will get would have cost the City about $80 million.
In good years there have been increases. Here is how the increases for the last 5 years compare.
Year Police and Firefighters Social Security
2009 0.0% 5.8%
2008 5.3% 2.3%
2007 2.6% 3.3%
2006 2.2% 4.1%
2005 4.1% 2.7%
Average 2.8% 3.6%
To characterize the police and firefighter at risk benefits as a Gravy Train is simply wrong. To suggest that these retirees bear the brunt of balancing the City's budget is mean spirited. It is also inconsistent unless The Sun also supports cutting Social Security retiree benefits to balance the federal budget.
The Sun is also wrong on William Donald Schaefer's position. Schaefer, Mayor at the time the Variable Benefit system was created, was initially opposed. However, he eventually became a solid advocate of the Variable Benefit, evidenced by his Citizen's Commendations to me and others involved in creating it, and by his strong support of it with retirees.
Robert G. Bolton, FSA
Bolton Partners, Inc.
(443) 573-3904
(561) 799-2813
rgbolton@boltonpartners.com
Robert G. Bolton is president of Bolton Partners Inc., an actuarial, benefit and investment consulting firm headquartered in Baltimore
