At least 19 Omaha firefighters are expected to leave the department this year with a chance to spike their pensions — the last gasp of a practice that is partially to blame for a $610 million pension shortfall.
Firefighters have until Thursday to tell the city whether they plan to retire under the old pension system, which allows them to work extra overtime or use banked comp time to boost income in the months leading up to retirement.
That practice, which artificially increases pension payments, was eliminated in the fire contract passed late last year. Instead, the new contract averages overtime and comp time over the course of a career.
But the contract also gave firefighters 90 days to decide whether to leave under the terms of the old agreement.
So far, 14 firefighters have said they will retire under the old system. Five more have indicated that they will resign under the terms of the old contract, allowing them to collect benefits once they turn 50.
Some of the departing firefighters had less than 20 years of service when the new contract was passed. But according to a letter from the City Council's negotiator to the fire union president, firefighters who reached a service time milestone during the subsequent three months would be able to claim the related benefits.
That particularly affected the 13 firefighters who remain from a class hired in February 1993. They will be allowed to leave the force — and potentially use spiking to inflate their pensions — while being credited with 20 years of service.
So far, only three of those firefighters have indicated that they will do so.
It's a good deal: Under the old contract, pension checks jump from 36 percent of salary to 55 percent of salary upon reaching 20 years of service.
When the latest police contract was passed in 2010, officers were not given a similar period to reach a pension-boosting service milestone. The police contract also eliminated spiking.
Aaron Hanson, a police officer who sits on the police and fire pension board, said he hopes few additional firefighters take advantage of the opportunity to leave with extra benefits. If more retire under the old system, he said, it could hurt the beleaguered pension fund.
“I'll hold off judgment until I see how many people retire,” he said. “We'll know the impact on the 28th. Every dollar counts as we work hard to heal the fund.”
Using the old system can make a significant difference. A city analysis of estimated pensions for the 13 firefighters who hit 20 years in February showed an average gain of 16 percent if they take benefits under the old system. One firefighter stands to gain 52 percent.
Granted, other factors go into a firefighter's decision to leave the department, said city attorney Bernard in den Bosch. Those who choose not to retire will continue to gain service time and build their pension payouts.
Many firefighters are weighing their options, he said. In the past few months, he said, some potential retirees have requested their pension estimates and then decided against leaving.
The added cost from allowing firefighters to reach the 20-year milestone was not considered by an actuary who examined the savings of the fire contract. But in den Bosch said it shouldn't have much of an impact given the size of the pension fund.
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