Cap on Carman VFD pensions focus of district vote Tuesday
System now pays out about $100K yearly; future troubling
ROTTERDAM Voters in the Carman Fire District will have a chance to limit a firefighter pension plan so that it doesn’t place an undue burden on the company’s finances in the coming year.
Ken Posson, chairman of Carman’s Board of Fire Commissioners, said the resolution on Tuesday’s ballot proposes changes that would bump down taxpayer-funded pension costs to roughly $100,000 next year. Without the changes, he said the district faces a contribution of more than $180,000, which represents more than a quarter of the overall budget.
“And don’t be surprised if it’s higher than that,” he said Friday.
The resolution on Tuesday’s ballot proposes to reduce the maximum number of credit years from 40 to 25 and fix the interest rate used to calculate payouts. Firefighters would also be prevented from taking a lump-sum payout — if the resolution is approved by voters.
“It’s eating a big share of our budget up,” he said of the pension fund.
Many volunteer fire companies have what is called a length-of-service award program that acts in a similar manner as a pension. Vested firefighters are given credits for each year served on the force and then provided with a modest monthly stipend at retirement age.
Carman has a defined benefit program, which requires an annual contribution from the company and allows firefighters to begin collecting from it at the age of 60. Currently, firefighters can accrue up to 40 years of credit.
Once eligible to collect from the pension, firefighters can either receive a lump sum based on a variety of factors or monthly payments for the duration of their lives. At Carman, Posson said collecting a lump-sum pay out can result in the fire company having to pump tens of thousands of dollars back into the pension fund through its annual budget.
“When you take a lump sum — especially when you have two or three in firefighters taking it in a year — that takes a big chunk out of the fund,” he said.
Posson said lump sum payouts are also calculated by interest rates. Low interest rates result in lump sum payments that are much higher for firefighters, as has been the case during the economic downturn.
Recent legal precedent also means firefighters can remain on the force beyond the age of 60, meaning some can continue to collect pension credits up to the full 40 years. But because the pension was established in 1993, no firefighter has come close to reaching 25 years of credit, much less the maximum amount allotted today.
Posson said the proposed resolution wouldn’t affect any firefighter already collecting from the program. But if nothing is done, the company will start to face significant cost issues that will ultimately hurt expenditures like vehicle replacements and equipment.
“We’ve got to do something,” he said.