Trenton City Council members approved a new pension plan for union employees of the Thursday at .
The new plan transitions officers from a defined contribution plan implemented in 1995 to a defined benefit plan. Officers now have a guaranteed pension plan instead of a 401k plan.
Mayor Pro-tem Terry Teifer said the new plan, coupled with the decision for , offers the city marginal savings and allows the city a chance to reduce reliance upon the fund balance to balance the budget.
By the numbers
Under the pension plan officers can retire at age 55 with a two percent multiplier with no increased cost of living adjustments or COLA. Which means officers get two percent of their average annual pay multiplied by their number of years worked beginning in 2012.
If a newly hired police officer works for the Trenton Police Department for 25 years and has an average annual income of $50,000, his or her pension would be roughly $25,000 per year until the day he or she dies.
The multiplier is applied to years worked from 2012 and beyond. Officers can rely on their defined contribution, or 401K, plan for previous years worked.
The base pay pension plan does not allow more than 30 days of additional hours worked outside the standard 40 hour work week to be added. This restriction protects the city by preventing officers from rolling in hundreds of hours of overtime, vacation days and sick days to inflate their annual income, thereby making their annual pension larger.
Cost to the city
City Administrator Jim Wagner said the plan was prudent and fiscally responsible to the city. He said the city stands to save between $200,000 and $500,000 annually over the next 10 years.
There is no added cost to the city for the foreseeable future, according to Wagner.
Risks and potential losses to the city according to Mayor Pro-Tem Terry Teifer
Teifer said the new plan is not without risks, but maintained it was a savings to the city.
"This is a modest deal," Teifer said. "It does not include overtime in the final average comp or cost of living adjustments that are present in the existing plan. A future council could add that in, but the union cannot force improvements for ten years through binding arbitration."
"The actuary uses a seven percent annual return assumption, which I believe is reasonable for the long term,” Teifer said. "The risk to the city over the long run is that if the assumptions are not made the city must pay. Keep in mind, these young police officers will not retire for at least 20 years."
“I believe that due to the fact that our public safety employees do not participate in social security, we need to provide some certainty to their pensions. Again, this is a fair pension plan for both our (command and patrol) officers and, together with negotiated health care 20 percent cost sharing, provides real savings to our city.”
*This story was updated at 6:06 p.m. Tuesday.