Police latest borough union to agree to pension change

NAUGATUCK — The police union has become the sixth borough union to switch from a defined benefit pension plan to a defined contribution plan.

The Board of Mayor and Burgesses voted to approve a new collective bargaining agreement with the Police Collective Bargaining Unit at a special meeting Sept. 29.

The union approved the changes in a near-unanimous vote and signed the documents Tuesday, said union President Sgt. Bryan Cammarata.
“I absolutely think that the negotiation addressed needs of both sides. I think the town has a pretty good arrangement moving forward down the road,” Cammarata said.

Cammarata said he doesn’t like to see pensions go away, but the union understands that the town cannot afford them.

As part of the agreement, the borough will also offer an early retirement incentive for up to eight employees that have served at least 20 years. Ten employees are eligible for the incentive. If all of them want to take the incentive the eight most senior employees will be offered the package.

Switching to a defined contribution plan, which is similar to a 401(k), for all borough employees has been a major goal of Mayor Robert Mezzo since he was elected in 2009 because it will ease the borough’s burden in the long-term.

The police union is the largest borough union to switch to a defined contribution plan so far, with the firefighter union remaining the last bargaining unit with a defined benefit pension. The fire union’s contract is up in June.

Borough officials negotiated with the union for about a year before coming to an agreement, according to Mezzo.

“We don’t go in and bang our hand on the table because that’s not how it works. I think it’s more important to be smart and achieve savings than be bombastic and threatening things that you don’t really have the power to do,” Mezzo said.

Under the new plan, current police employees will keep their existing benefits, but new hires as of Sept. 1 will go into the defined contribution plan. The borough will contribute up to 3.75 percent of new employees’ wages, not including private duty.

Current employees will double their contributions to the defined benefit pension plan from 4 to 8 percent, with the guarantee that the borough will not change the agreement again until 2051.

For their pension, current employees can earn 75 percent of wages after 25 years of service, which is the same under both agreements. The calculation for retirement benefits will be based on the “best” three years of employment, under the new agreement, rather than the last three years.

Under the new agreement, current employees, who retire can earn 60 percent of their salary after 20 years of service. Previously, employees couldn’t collect their pension until they were 50 to 55 years old, but now most employees who entered the service in their early 20s will be able to retire after 20 years.

Because of the increased costs for early retirement, the borough doesn’t expect to see savings from the new agreement until 2016.

According to projections provided by actuary Shirley Assantes, the borough will pay about $159,000 more for pensions this year, but will pay less each subsequent year, and save $928,000 in defined benefit pension payments in 2030.

The estimate is based on a sophisticated computer modeling program that takes into account factors such as age at date of hire, turnover, mortality, retirement age, and spousal benefits, Assantes said.

“While there will be initial costs associated with retirement and accelerated pension payouts, the change will yield long-term fiscal stability for borough taxpayers and a more sustainable government in terms of benefits paid to future employees,” Mezzo wrote on his blog.

Mezzo thanked representatives from the police bargaining unit for their many months of professional and respectful dialogue that were necessary to reach this deal.

“Our police officers do an outstanding job of protecting and serving our community with limited resources and often in the midst of dangerous circumstances,” Mezzo wrote on his blog.