NAUGATUCK — New municipal employees will probably not receive the same sweet pension deals their predecessors enjoyed for decades.
A priority for Mayor Robert A. Mezzo is to bring municipal employee pension plans in line with the private sector, where many employees contribute to their retirements through defined contribution pension plans such as 401(k).
Currently, the borough pays almost $8 million a year in pensions for municipal retirees, and many of the employees are vested into pension plans that guarantee them annual retirement incomes worth 75 percent of their best three years of service.
The money adds up when overtime is calculated, especially for police officers and firefighters, many of whom retire with more than $70,000 a year in pension; by comparison, the median household income in Naugatuck for 2009 was $64,313.
“Plans that offer a certain amount are called defined benefit plans, which municipal union employees here enjoyed for many years. In the defined contribution plan that Mezzo is trying to negotiate, contributions made by the employee and a match by the employer are invested in the stock market, and the employee gets the returns on investments.
So far, Mezzo has been successful in getting four of the seven municipal unions — excluding police and firefighters — into the defined contribution plan for new hires; the borough will give 3 percent — to the plan. Current employees are either vested in defined benefit plans or are grandfathered into those plans.
Mezzo said he also has a tentative agreement with another union to go into the defined contribution plan for new hires. The borough has not yet started official contract negotiations with police and firefighters.
Naugatuck does not have a number on how much it plans to save from the new pension plans, but Controller Wayne McAllister believes it will be significant over time. And, officials believe they can start seeing savings within four years in some of the unions.
During negotiations, unions have been given incentives for their pension givebacks. For example, Naugatuck has given early retirement packages in exchange for the pension plans.
“You can’t be willing to give away the store for it, but you can’t be short-sighted and just look at the near term at the expense of long-term stability for the borough,” Mezzo said. “If we started doing this 15 years ago, my job we be much easier.”
In an ideal world, he said, the borough would like to provide the type of pensions it is giving now. He said he doesn’t begrudge anyone who has lucrative pensions because many of them worked hard for them.
“It just comes down to math,” he said. “We’re not going to be able to pay the next generation of workers the level of benefits we’ve been paying.”
State officials have come to the same conclusion and nothing has come of many attempts to change pension plans.
Mezzo said he has some fears with the new pension plans, including that people who retire in a down market might not get a comfortable pension.
The first bargaining unit that agreed to the plan was the supervisor’s union. That union’s president, Louise Sheedy, supervisor of the Tax Collector’s Office, said the union offered to enroll new hires into defined contribution plans two years ago, but officials didn’t take her up on it.
“Bob was the first mayor willing to do it,” she said. “We offered because we understand the financial issues the borough is facing. Most of us live here, and we’re taxpayers, too.”