North Shore Fire Department to trim health benefit
Union decries decision as poor planning
In order to address its looming, unfunded retirement benefits, the North Shore Fire Department plans to cut its health insurance costs by about $175,000 in the coming year and beyond.
Under a recommendation by the NSFD Board of Directors on Tuesday, the savings would be diverted to a long-term retirement account.
A recent actuarial study pegs NSFD's 30-year, unfunded retirement liability at about $30.4 million. To fund that cost, the department would have to put away almost $3 million annually, the actuaries have found.
Setting aside $600,000 to retire
This year, NSFD began putting away $422,000 annually to contribute to retiree benefits.
The board's recommendation directs NSFD administrators to aim for a $175,000 reduction in overall health care costs when negotiating coverage with its health care insurer for the 2014 budget year. If that amount were then diverted into the department's retirement fund, the total annual amount set aside each year would be about $600,000.
"It's a budget neutral impact, because you're changing what the plan is, and moving those savings over to the account for retiree benefits," said Fire Chief Robert Whitaker.
Though $600,000 annual contribution still doesn't meet the actuarial projection to completely fund the benefit, Whitaker said it should be enough to cover year-to-year retirement costs and prevent the department from dipping into other budget areas.
"What this does from a long-term perspective is ensure the financial health of the organization," said Whitaker.
A precise estimate of how much the added contribution will lower the unfunded liability isn't currently available, Whitaker said.
Paying for fiscal mistake?
The firefighters union, however, is criticizing the move, saying that if the board had funded retiree benefits in the past, it wouldn't have to be cutting firefighters' health insurance now to foot the bill.
"The North Shore Board has mismanaged savings and made poor financial decisions that have put them in this situation and it is a direct result of poor planning," Local 1440 President Steve Tippel said in a statement. "The Board of Directors has been aware of its obligation since the inception of the North Shore Fire Department in 1995 and has done nothing to make sure it was funded."
Tippel added that the new reduction in benefits, if approved for 2014, would contribute to a roughly 20 percent reduction in overall pay and benefits for firefighters over the last two years.
In response to Tippel's comments, Whitaker said NSFD boards in the mid-1990s couldn't have foreseen the precipitous increase in health insurance costs which has occurred. In practice, he added, the board began long-range planning for retiree benefits about 21/2 years ago before instituting the retiree benefit fund this year.
"The benefits were paid on a pay-as-you-go basis. That was a decision made by prior boards, prior administrations," said Whitaker. "Could (the board) have averted some of it? Sure. But a large majority is still an issue that the board has been dealing with for two or three years, in an environment where taxpayers don't want to pay more, or can't due to levy limits."
Added Whitaker: "The bills are rising faster than we can gain taxpayer support for budgeting."
Whitaker said that when firefighter contracts are up for renegotiation in 2017, the board will likely look at changes to the overall NSFD retirement benefit to further reduce its long-term liability.
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