New here, any other fire department members here?

[leftbucket]

Hey Capt.-

Another new FF here, and yes, I'm working my days
off to finance ER. In my case its OT work for now, but that
may dry up soon as we're facing the same constraints
as many municipalities.

Pretty similar situation actually. 14 more years to go
to 25 years and out. That gets me 72% of salary.

There is an early out in my case @ 20 years but that
is sharply reduced to 43%. That's why I'm maxing
out my 457 and Roth. I don't know if I'll go @ 20 years,
but I'd like to have it as an option when I get there.

You refer to off day (singular) and civil service pension. Are
you a federal firefighter? What's the health insurance
situation for retirees in your case?

Thanks for your input and be safe,
LB

[FDCaptain]

Quote:

Originally Posted by leftbucket Hey Capt.- Another new FF here, and yes, I'm working my days off to finance ER. In my case its OT work for now, but that may dry up soon as we're facing the same constraints as many municipalities. Pretty similar situation actually. 14 more years to go to 25 years and out. That gets me 72% of salary. There is an early out in my case @ 20 years but that is sharply reduced to 43%. That's why I'm maxing out my 457 and Roth. I don't know if I'll go @ 20 years, but I'd like to have it as an option when I get there. You refer to off day (singular) and civil service pension. Are you a federal firefighter? What's the health insurance situation for retirees in your case? Thanks for your input and be safe, LB

Good to hear from you leftbucket.

I work 24 on and 48 off for a municipality. "Off Day" I guess is slang terminology if you will. We have a 20 and out pension that tops out at about the 27th year. Health insurance is covered for the retired employee but there is a premuim for spouses. I look for the employee to have a premium soon. This year the state legislature voted to change the retirement plan for new hires. They will now have to work 25 years. They also set the COLA to 1.5% indefinitely unless they have a special session to raise on a particular year....I wont hold my breath for that. The bad thing is the city has not been putting in their share for years. Now to fix it they take away benefits.

I am with you on preparing to leave when the option is available. The option to leave or stay based on wants and not needs will be a good place to be.

FDCaptain

[Dog]

I'm curious - do you guys think your healthcare & pension plans will eventually go the route of the private sector? Phased out for new hires and frozen for existing employees. I'm hearing more and more that cities, counties & states can't meet their financial obligations. I have a nephew that will graduate from Air Force Fire Training in San Angelo, Tx next week and will next be stationed in Germany. I'm wondering about his future prospects.

[Walt34]

Quote:

Originally Posted by Dog I'm curious - do you guys think your healthcare & pension plans will eventually go the route of the private sector? Phased out for new hires and frozen for existing employees.

I think so. My former employer (I'm retired law enforcement) has changed the retirement plan three times since I started, each time reducing the benefits and emphasizing savings in a Deferred Compensation account (similar to 401k). The system I'm under they stopped offering in the late 70's when the actuarial people and the accountants crunched the numbers and collectively fainted.

In a rare move of governmental responsibility though, the pension plan is fully funded and the county strives to maintain it's AAA bond rating.

[FDCaptain]

I do have concerns over the future of our pension system. I feel quite sure that I will pay for health insurance benefits for my wife and I upon retirement. The COLA will probably be the current 1.5% or less.

I have less worry about the total pension fund defaulting. Mainly because the legislative pension system would default as well. I believe they will make sure they get a pension.

Over the next few decades I think new hires will see less compensation from our pension system. If not a a 401k in its place. However, the tone now is for them to honor past and current employees pension benefits.

Our city has been financially stable for decades and has no real reason for under funding. Here is something interesting....when the pension reform bill passed this year they gave a one year moritorium to the cities on contributions. Thats right they were already behind but got a year off!
I of course will be contributing without option.

FDCaptain

[Leonidas]

Quote:

Originally Posted by Dog I'm curious - do you guys think your healthcare & pension plans will eventually go the route of the private sector? Phased out for new hires and frozen for existing employees.

Most likely.

In fact, I left partially motivated by the changes that were set in place right after I retired. They were fair about grandfathering people in, and allowing for a transition period so people didn't have to make a decision within a limited time. People that stayed for more than three years came out fine, and a few people like me had to retire or work another 5-10 years to get back to even.

Our pension is managed by an independent board of employees, retired employees and the mayor's representative. While the city has been negligent in paying their share of contributions (it's a 50-50 split) they finally started paying fully after they got some changes that they wanted. But the scary thing is health benefits, controlled by the city, which are getting more expensive every year. I predict radical change in that area at some point.

[leftbucket]

An excellent read on this subject is a new book
by Roger Lowenstein called While America Aged.

You wouldn't think a book about pensions would
be that interesting, but his storytelling is actually
pretty gripping.

As far as your nephew is concerned, I wouldn't
be too alarmed as the military actually has a
pretty high turnover rate compared to most other
public service jobs, allowing them to control
their pension costs.

I agree with you all in that retiree/pensionee
health care is the largest of the problems
currently. It's just so ridiculously hard
to plan for.

-LB

[leftbucket]

Dog-

I re-read your message and I think I catch your drift
now. Your nephew is planning on a fire service career
OUTSIDE the Air Force (didn't pick up on that the
first time). I think there will be plenty of municipalities
with pensions for quite some time, especially for fire
and police... there's simply too much costly training involved
not to have that retainer in place.

I think though, that retiree health care as we know it,
though, is going the way of the dinosaur quickly.

I work for a large department outside D.C. and mine
does not (and has not ever) offered retiree health care.
Other counties around mine are dropping/reducing theirs
quickly.

-LB

[Cruisinthru]

I am retired from a large fire department. I retired as a section chief in the investigation unit. I retired at age 55 three years ago with 27 years on. I have my pension, 457, and a drop account. Retirement is wonderful! It makes it all worth while. Good luck on your plans for retirement.

[Cruisinthru]

I forgot to add that I am also retired law enforcement. So I guess I fit with a few more on this board. I was police certified by the fire department to handle arson cases.

[FDCaptain]

Quote:

Originally Posted by Cruisinthru I am retired from a large fire department. I retired as a section chief in the investigation unit. I retired at age 55 three years ago with 27 years on. I have my pension, 457, and a drop account. Retirement is wonderful! It makes it all worth while. Good luck on your plans for retirement.

We have heard the possiblity of our pension system adopting a drop plan. No real details yet. Would you mind giving an explanation of how yours works?

Glad to hear retirement is treating you well!

Thanks, FD Captain

[Walt34]

Quote:

Originally Posted by FDCaptain We have heard the possiblity of our pension system adopting a drop plan. No real details yet. Would you mind giving an explanation of how yours works?

Ours offered a drop plan for a limited time. Essentially, you "retired" and that fixed your future retirement benefits, which were paid tax deferred into a drop account. You continued working at your current salary and continued to receive any scheduled pay increases, but those would not be applied to your future pension.

I elected not to participate (glad I didn't!) because they required that you commit to retiring within two years of enrolling in the drop plan and at the time I was at the top of my game, enjoyed my job, and didn't want to commit to going out within the two years. After that period the retirement got 15% better and after looking at the numbers I took the opportunity.

The FD's plan differed in that they didn't require that you retire within the two year period and many more people took that option.

[Leonidas]

Quote:

Originally Posted by FDCaptain We have heard the possiblity of our pension system adopting a drop plan. No real details yet. Would you mind giving an explanation of how yours works?

I'll chime in on mine because I love the DROP. And from what I've seen, every DROP plan is different.

The simple version is that once you reached normal retirement age/service length, you can choose to "retire" but still keep working and earn your regular paycheck. The city stops paying their matching contributions in your case and your pension payment is calculated and frozen at the rate you would get if you really retired and stopped working. You continue to pay your share of pension contributions, but those payments, as well as your pension payments, are all shuffled into a sort of synthetic account on the books of the pension. My system calls this a "notional account"

Quote:

What is a “notional” account? •A notional account only exists on paper. •There are no separate bank accounts set aside for each participant’s DROP monies. •The DROP monies are invested along with all other pension assets

Until some changes made about the time I retired, the notional account earned at a rate determined by a 5-year rolling average of what the pension system made on all of its investments. They now limit that in an effort to minimize financial risk to the system as a whole.

Quote:

What interest rate will my DROP account earn? •The DROP interest rate is a rolling average of the prior 5 years of the Systems’ annual rate of return, subject to a minimum of 3% and maximum of 7%. •The maximum can temporarily increase to 10% in the event that the pension system is determined to be 100% funded. •The DROP account interest rate changes January 1 of each year.

Additionally, each April the pension payment receives a COLA based on 80% of the metro area CPI, and is a minimum of 2.4% and a maximum of 8% (used to be 100% of CPI, minimum of 3% and no maximum).

When you retire and stop working you also stop making contributions to the DROP and have to withdraw from the DROP. Your choices are to either roll your money over into an IRA, or you can roll the DROP balance over into a Post Retirement Option Plan (PROP). Which means you leave the money at the pension and they continue to pay interest based on the same formula as in the DROP. They stop making payments into your notional account and that payment turns into a normal monthly retirement check.

If you retired at age 50 or later, you can make penalty-free withdrawals from the PROP. If you retired earlier than 50 (or 55 when I retired) you can do a SEPP.

I took my DROP money and rolled it into a traditional IRA at Fidelity. So far, I would have been better off leaving it in PROP, but we had a new mayor who was on the warpath and saying a lot of scary things. Nobody knew how it was going to work out and my buddy on the pension board said "we're protected now, but we don't know what the mayor's plans are in the legislature. We don't know how much power he has there or what his intentions are." I figured it was better to have control over my money rather than wake up one morning and find out I had been robbed. Plus, I thought "Hey, I can beat 7%!" Yeah, right. Well, at least I beat the market this year.

[Leonidas]

Good examples from Walt on how the DROP is different someplace else.

The differences here were due to the previous administration being total financial buffoons who were having a hard time giving us the pay raises that the contract called for. About 50% of the department was at retirement age and they knew they would lose a lot of people if they didn't do something. So they liberally sweetened the pension as if they expected to hit the lotto in a couple of years. Well, that or they knew that term limits would see this problem being something the next mayor would have to take care of!

Quote:

Originally Posted by Walt34 You continued working at your current salary and continued to receive any scheduled pay increases, but those would not be applied to your future pension.

That's how our program started, but under the "sweetening" process they created a recalculation. My DROP payments were frozen at the rate of a 20 year Sergeant (equal to a FD Lt.), but when I retired they recalculated my pension to what it would be as a 25-year Captain (equal to a FD Dist Chief). It meant an additional $22K in my pension. They also did a DROP recalculation, which meant if you had DROPped before a significant pay raise or promotion, you could have them change your DROP entry date to something later. Anyone who was making more money then when they DROPped, and was planning on staying a few years, came out significantly ahead. You had to surrender whatever you had already made in the DROP, but the new DROP payment amount made up for that and then some in just a few years.

Quote:

Originally Posted by Walt34 ...they required that you commit to retiring within two years of enrolling in the drop plan...The FD's plan differed in that they didn't require that you retire within the two year period and many more people took that option.

Our situation was nearly the complete opposite. The FD's plan required retirement no later than 5 years after entering DROP, the PD's was unlimited.

For me, the DROP was a great deal. Such a good deal that the mayor managed to reopen the contract with the pension system and get some changes that took place right after I left (and partly why I left):

Quote:

This FAQ only applies to those members that were members of HPOPS prior to October 9, 2004 with no separation of service subsequent to that date. If you were hired or rehired after October 9, 2004 this FAQ does not apply to you.

Killing the DROP was high on the mayor's to-do list.