Portsmouth fire union first to agree to 401(k) retirement plan
Three year contract trades raises for pension change
Portsmouth and its firefighters' union have signed a three-three year contract that the town says averts a looming "pension crisis."
"Ours is the first firefighters' union in Rhode Island to agree to a 401(k)-style retirement plan instead of the traditional defined benefit plan," Town Manager John Klimm said.
The deal approved Monday evening is a "giant step foreword" toward solving what had become a "monumental fiscal problem" for Portsmouth, he added.
Under the new contract, employees hired after June 30 will receive a 401(k) retirement plan. Portsmouth will contribute 8 percent of an employee's salary and the employee will contribute the same amount. The town's contribution to employee pensions last year was over 31 percent of employees' salary, and it was slated to rise to 52.2 percent of salary this year if nothing changed.
"That's money the town doesn't have," Mr. Klimm said. "Big changes had to be made if we were to keep the plan afloat."
Also, current firefighters who retire will no longer receive an automatic 3 percent increase in pension benefits every year. Instead, they will receive no increases during the first five years of retirement and 1.7 percent thereafter.
Pay raises of one-half percent will be granted on July 1, 2013, and January 1, 2014. Two percent raises will be given on July 1, 2014, January 1, 2015, July 1, 2015, and January 1, 2016.
Portsmouth operates its own pension system for town employees. A study of that plan by the town's actuaries last year found that it was underfunded by $37.2 million, landing the plan in "critical status."
I can't thank Union President Howard Tighe and our Fire Department staff enough for working with us to solve our financial problem. We have a great Fire Department and I join our Town Council in giving recognition and thanks for the great job they do for our citizens every day," Mr. Klimm said.