Houston Mayor Annise Parker unveiled a proposal for a new defined benefit plan for incoming city firefighters on Thursday.
The proposed firefighters pension plan would be managed by the city, said a news release from the mayor's office. Under state law, the city is excluded from financial decisions related to the existing firefighter pension plan, the $3.8 billion Houston Firefighters' Relief and Retirement Fund, including benefit levels and employer contributions. All decisions are made by the pension fund board.
Firefighters who are currently employed by the city will remain in the existing pension fund, according to the release.
The proposed plan for new employees, which is expected to save the city $110 million in costs over the next 20 years, would resemble the $2.3 billion Houston Municipal Employees Pension System and $3.9 billion Houston Police Officers Pension System. However, the proposed plan does not guarantee annual cost-of-living increases.
Under the mayor's proposed plan, employees would contribute a mandatory 9% of their base pay or one-third of the total actuarially determined contribution rate, whichever is greater, to the plan.
Retirement eligibility would be determined based on age and years of service. Under the proposed plan, firefighters would have to be 55 years or older with at least 10 years of service in order to retire with full benefits. Under the existing firefighters' plan, employees can retire after reaching 20 years of service, regardless of their age.
The state constitution gives Houston the authority to create the proposed plan, according to the release.
“I have said from the beginning that I am committed to maintaining defined benefit plans for our city employees, but I also strongly believe that the taxpayers who have to pay the bills deserve to have a say in what those plans look like and how much they cost,” Ms. Parker said in the news release. “This provides the local control we have been seeking and puts in place a plan that will, over time, achieve parity among our public safety employee pensions and help the city meet its employee pension obligations.”
The proposed plan would be managed by an appointed committee consisting of a senior city finance department employee, a senior city human resources department employee, a firefighter appointee, an independent mayoral appointee and an independent appointee of the city controller. Plan assets would be invested and held by an independent institutional trustee, according to the release.
On May 7, a Texas state district court rejected Houston's petition to declare unconstitutional the law under which the Houston Firefighters' Relief and Retirement Fund operates. The city has unsuccessfully petitioned the Legislature to overturn the pension fund's statute twice before.
The city is able to negotiate with trustees of the Houston Police Officers' Pension System and Houston Municipal Employees Pension System.
Janice Evans, a spokeswoman for the mayor's office, did not return a telephone call seeking more information on the proposed plan by press time.
“(The proposed) board makeup is absolutely ridiculous.
The Houston Firefighters' Relief and Retirement Fund board will have no control at all,” said Todd E. Clark, board chairman for the Houston Firefighters' Relief and Retirement Fund, in a letter to pension fund members posted on the pension fund's Facebook page. “The city of Houston has been warned of litigation if they decide to carry through with this nonsense. Our statute that governs HFRRF is clear, all firefighters employed by the city of Houston Fire Department belong to HFRRF,” wrote Mr. Clark.
Savings generated from the new plan can help reduce the $533 million in unfunded liability in the existing pension plan, according to the release.