Key details of the agreement

Mayor Jim Suttle said Wednesday that he had reached a tentative deal with the Omaha police union for a new five-year contract.

Answers to some key questions:

What years are covered under the new contract?

2009 through 2013.

What happens to officers’ pay?

For the current year and next year, officers would forgo any pay increase to give the city some breathing room to deal with its budget crunch.

Then what?

It’s catch-up time. In 2011, police would get a pay boost equal to 75 percent of the difference between their pay and the average pay for officers in seven comparable cities. That means if Omaha officers had fallen 10 percent behind the seven-city average by 2011, they would get a 7.5 percent pay boost. Under the contract, the 2012 pay gap would be closed further by making up 80 percent of the remaining difference. In 2013, the city would make up any remaining difference, less 1 percentage point.

Why so complicated?

Nebraska law requires the city to match the average of the comparable cities. The mayor wanted to put some cap on how high those raises would go in any one year.

What cities is Omaha being compared to?

Denver; Fort Worth, Texas; Oklahoma City; St. Paul, Minn.; Wichita, Kan.; Cincinnati; and Tulsa, Okla.

Who picked those cities?

The city and the police union each submitted a list of cities to the Nebraska Commission of Industrial Relations. The commission then chose the seven cities it considered the most comparable to Omaha.

What would happen to health care premiums under the new contract?

Premiums would not increase in 2009 or 2010. In the last three years of the contract, the premiums would increase. How much depends on what happens to premiums in Omaha’s comparable cities.

Why did Suttle want to make changes to the police and fire pension fund?

Omaha faces a long-term, estimated $500 million shortfall in its police and fire pension fund. City officials have long been worried about the pension problems, which stem from generous benefits negotiated with police and fire unions as well as investment values that plummeted. Earlier this year, then-Mayor Mike Fahey created a task force to find solutions. In negotiating the new contracts, Suttle followed many of the task force’s recommendations.

How would police officers’ pension benefits change under the new contract?

— Spiking: Suttle says the new contract would eliminate the practice, which allowed officers to boost their pension benefits by working extra hours in their last years on the job. Under the new plan, pension payments would be based on an officer’s career average of overtime.

— Retirement age: Currently, police with 25 years’ experience can retire as young as 45 with full benefits. Under the new contract, that would change for new officers and current officers with less than 17.5 years on the job. Those officers would be required to work 30 years, instead of 25, and reach age 50, not 45, to receive full benefits.

How much money would these changes save for the pension system?

The city estimates that it will save the system $13.5 million in reduced benefit costs annually.

Is that enough money to shore up the fund?

No. Suttle says the city also needs to come up with $13.5 million a year in higher contributions to the fund. The mayor is seeking a half-cent increase in the sales tax. However, the Nebraska Legislature, and eventually Omaha voters, would have to sign off on the plan.

What’s DROP, or the Deferred Retirement Option Plan?

It’s a supplemental retirement program that Suttle thinks would provide financial incentives for police officers to stay on the job, even though their pension benefits were maxed out.

Here’s how it works:

— Officers would officially retire but keep working for the city and earning a regular paycheck.

— An officer’s pension payments would then go into a special account within the pension fund to be paid out later in a lump sum.

— The value of the special account could increase, because of investment gains, but could not decline.

Have other cities tried a DROP program?

Yes. It has been controversial in San Diego, where $350 million in DROP benefits contributed to the city’s $2.3 billion in unfunded retirement benefits. However, in San Diego, employees received a guaranteed 7.75 percent in compounded interest. Suttle says Omaha would not guarantee investment returns, although the value of the fund could not decline. In addition, Omaha officials say they would order an independent actuarial study after five years to determine whether the DROP plan was cost-neutral to the pension fund. If it wasn’t, city officials say, they would scrap the program.

Is the police contract a done deal?

No. The agreement is subject to approval by both the union membership and the City Council.

What’s going on with the fire union contract?

Suttle has reached a tentative wage deal with firefighters, but a deal has not been reached on pension benefits. Firefighters have agreed to a two-year wage freeze for 2009 and 2010. Firefighters would receive wage increases of between 3.25 percent and 5.75 percent in 2011, 2012 and 2013.