UPDATE: Our municipal pension reform legislation has been amended into a new vehicle – House Bill 414. On November 18, the Senate Finance Committee voted to incorporate the language of HB 316 and SB 755 into HB 414, a bill that has already passed the House.
Unlike the current defined benefit pension plan structure for municipal police and fire personnel, S.B. 755 will reduce employer costs by providing the option of a defined contribution pension for new public safety employees. This alternative plan reduces benefits, but increases the predictability of costs resulting in sustainable pensions and an eventual phase out of pension plans that are underfunded.
The Municipal Alternative Retirement Plan applies to future police officers and fire fighters.
Current police and fire fighters maintain all existing rights and benefits; these benefits are frozen at current levels in order to stop the continued escalation of costs.
The Municipal Alternative Retirement Plan is a defined contribution plan based on contributions from the employer and employee that are a percentage of base pay, plus investment earnings. This is opposed to the current defined benefit formula that is based on a percentage of final average salary in the last years of service.
The unaffordable practice of pension spiking is ended.
Pension benefits of current and future employees are not subject to collective bargaining.
The Municipal Alternative Retirement Plan is optional. Local elected officials must affirmatively adopt the new plan via ordinance.
Retirement eligibility is increased to age 55 and vesting options are expanded. Vesting of 100% of the employer contributions occurs at 10 years of service.
Pension portability for employees with this plan is much easier than those with a defined benefit pension.