Wednesday night, for at least the third year in a row, the Waterford Board of Finance agreed to send a letter complaining to the state about town employees' retirement plans, calling the retirements “unsustainable” and “completely out of whack.”
“This whole thing is completely out of whack,” Board of Finance member Alan Wilensky said. “What is fair is fair, and this is ridiculous.”
The board’s gripe is from the increases in cost of retirement for town employees under the state-controlled Municipal Employees Retirement System (MERS), of which Waterford is part. The problem with the system is two-fold, according to the Board of Finance’s letter: towns are continually forced to pay more, while the employees share stays the same; and overtime is being factored into retirement benefits, and they argue only base salaries should be used for factoring retirements.
“Our board feels strongly that municipal fringe benefits should align to those in the private sector, especially since municipal employees’ wages are now equal to or better than those in the private sector,” Board of Finance Chairman Ron Fedor wrote in the letter.
As late as 2004, towns would contribute 3.75 percent of a municipal employee’s salary, and 4.25 percent of salary to fire or police municipal employees, to their retirement to fund MERS, and the employee would contribute 2.25 percent.
In the past eight years, the taxpayer’s percentage has increased drastically, while the employees’ contribution has stayed flat. This year, taxpayers will contribute 11.79 percent of a municipal employee’s salary to retirement, and 16.65 percent of salary to a fire or police municipal employee, while the employee still contributes just 2.25 percent.
“Over the past several years, the Town of Waterford has experienced a tremendous budgetary increase in the cost of providing retirement benefits as a member of (MERS),” Fedor wrote in the letter. “The Waterford Board of Finance has been forced to grapple with funding these increases annually, sometimes at the expense of its service level.”
Wilenksy argued the employee share and the employer share should be the same, like it is for Social Security. He successfully lobbied Wednesday night to put in the letter that the town’s share should continue to go down and the employees’ share should continue to go up until they meet.
The board also agreed that pensions should be based off of base salaries, not salaries after overtime.
First Selectman Dan Steward said it is hard for the town to get out of MERS and said he would get a legal opinion to see if that is even possible. Board of Finance member Norman Glidden said rather then sending a letter and complaining, the town should slowly get out of MERS.
“I think it is a failing system,” Glidden said. “It is a system that puts us in-between a rock and a hard place and keeps squeezing.”
Board of Finance member Mark Wiggins agreed, saying if the town doesn’t start working on it now, it will never happen. Both men agreed that the town should leave existing employees’ benefits alone, but try to get new employees to have a defined contribution plan instead of a defined benefit plan or a 401K system.
“It is a big effort, so what, do it,” Wiggins said. “What’s the alternative to it, just sitting here and complaining about it for the next 10, 20 years?”
How Lucrative Is The Plan?
MERS is based on of the number of years the employee worked and the last three years of salary, including overtime. The last three years of salary earned by the town employee are averaged together. Then for each year a town employee works, the employee collects 2 percent of that average.
For example, if a town employee made $75,000, $80,000 and $85,000 in his or her last three years, and worked in the town for 30 years, he or she would collect 60 percent of $80,000, or $48,000 a year for the rest of his or her life. That number increases over time for cost of living.
The percentage is capped at how much you can collect. In most contracts, you can’t collect more than 75 percent of your salary, which would be achieved after working 38 years.