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Cape Coral plans pension changes; unions concerned

Negotiations on retirement benefits to begin this summer. 401(k)-like option on table.

May 22, 2012


Cape Coral’s finance director said Tuesday one of the ways the city might attempt to make its pension plans more sustainable is to move toward retirement options more akin to private 401(k) plans.

“Maybe future hires have to rely more on their own savings,” Vicki Bateman said at a Cape Coral Civic Association meeting. “You’ll assume the risk for those investments, the city doesn’t.”

If the city adopted such a plan, it would guarantee a certain contribution each year to the employee’s retirement plan instead of guaranteeing a certain level of benefits once the employee retires, which is how the system currently works.

But representatives from the police and fire unions who attended the meeting said Tuesday they have serious concerns with the idea, which would have to be negotiated during bargaining sessions that will likely begin this summer.

Fire union President Brendan Fonock said there’s a risk the retirement plans could falter, which would result in the city employing firefighters well past their prime.

“The 401(k), it’s hit or miss and, as we’re seeing currently in today’s society, a lot of people aren’t being able to retire because of the downfall of the economy,” Fonock said.

The head of the fire union’s pension board, he said, recently had a heart attack, which is an unfortunate side effect of a job that sees firefighters woken repeatedly in the middle of the night and thrown into crisis situations.

“He’s a perfect example of why you don’t want 60-year-old firefighters running around,” he said.

Police union president Kurt Grau said cutting pension benefits to that degree could severely affect recruitment efforts.

“If you make such drastic changes to the pension, it’s going to be extremely difficult to get new employees here,” he said.

Currently, firefighters are eligible for full pension benefits after 25 years of service or at age 50. It’s the same for police. General employees require 25 years of service or 60 years of age and are only eligible for 80 percent of their salaries.

Councilman Kevin McGrail said he was also skeptical of the benefits of moving toward defined contribution plans, partly because the costs to the city would increase as the number of people paying into the plan decreases.

Eventually, the costs for the plan would be eliminated once there are no more people in the plan, but that would take many decades, he said.

“When does it go to zero? When everybody dies,” he said.

McGrail said he was OK with asking employees to pay a monthly amount for their health care, which they currently don’t. Bateman mentioned an amount of $50 to $100 a month, which McGrail agreed was reasonable.

Other ideas discussed Tuesday included potentially increasing the retirement age.

But McGrail said the fix for the pension plans is still a ways away.

“We’re going to get there, we have to get there,” he said. “But we’re in this for a lifetime, you can’t take a short-term view.”

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