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Municipal Drop Plans


Guest pmpayne
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The city I work for currently has 2 pensions plans. ( the A plan has a 2.5% mulitplier, the B plan a 1.5% multiplier) They are termed a "68" credit plan. Whereas if you have a minimum of 15 years service and minimum age 50 but service and years must equal 68, you can retire with full pension. The city manager obviously has decided this plan is not cost effective. In the presently negoiated contract they are increasing the multiplier for both plans to A-2.6% B-2.5%. But in order to get the increased multiplier you must work 20 years and cannot retire before age 55. In addition they are offering a 3 year drop plan but only those who stay to age 55 w/ 20 years can participate in it. All are considered "normal" retirement plans in our contract. My question, and sorry this is so long, can they legally only offer the drop plan to the last group? Any help would be greatly appreciated. If nobody has an answer I would be forever greatful to anywhere you can steer me for an answer. Don't know if this matters but the plans we are discussing are for general bargaining employees, not police or fire. Thanks so much in advance.

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  • 2 weeks later...
Guest Ralph Amadio

Since I don't know what state you are in, I can't give you a definitive answer to your question, but here is some food for thought:

In many states, public pensions are viewed as contracts with the employees, and so stated in legislation, and in some cases in the state constitution. Any reduction in benefits for current employees is typically prevented. Future tiers may be added for new employees with lower benefits, with no effect for current, unless employee's opt for them. The DROP program may be method of jawboning employees into a new program.

Check past labor contracts for MOB (maintenance of benefits) provisions to provide precedent.

See if your local EEOC folks might have something to say about reductions for older employees.

Get your labor counsel to check with your state legislators to see if this type of move is legal under any of the above circumstances, or whether there are other circumstances that would prevent such happenings. If you have Labor Counsel, I would be happy to discuss this with them. info@publicagencyretirement.com

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Guest pmpayne

Thanks Ralph....I live in Florida. I will check out some of the avenues you have suggested. I appreciate your time and sharing your knowledge.

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