Portland to pay $240K in retroactive pension benefits to 20 FF, police retirees
An arbitrator ruled in favor of the retirees, whose pension came out to exceed their annual pay due to an "anomaly" in the system
The Oregonian, Portland, Ore.
The payout is expected to increase residents’ property taxes that support the fund, according to Sam Hutchison, executive director of the Portland Fire and Police Disability and Retirement Fund.
The public safety fund is unique among public pension funds -- it’s financed by Portland taxpayers through annual property taxes. Each year, the city sets the tax in an amount equal to the fund’s administrative expenses and benefit costs.
The retirees affected were no longer members of either the Portland Fire Fighters Association or the Police Commanding Officers Association when they left city service but should have been awarded additional pension benefits covering the time they were union members, according to a state arbitrator’s ruling this year.
Members of the firefighter and police unions currently have their pensions calculated based on a final year’s pay.
But if a firefighter or officer retires in a certain so-called “magic month,” their pensions may be artificially inflated when the final 12-month look-back period includes 27 pay dates, versus the more typical 26 pay dates.
Under the city’s biweekly pay structure, the city pays wages eight calendar days after the last day of a two-week period. The structure makes it possible to receive 27 pay checks in a 12-month period.
The 27th pay dates occur randomly and have become known as the “magic months,” allowing public safety retirees to have their pensions calculated based on more than one year’s pay if the firefighter or officer retired in that special month.
The city had argued that the former union members didn’t have “vested” contractual rights to have their pensions inflated by including a 27th pay date because they retired when they weren’t members of the respective unions.
The dispute involved retired command-level firefighters and police who, when they retired, weren’t part of a union but had retired during a month in which a 27th pay date occurred. That included captains and above in the Police Bureau and deputy chiefs and above in the Fire Bureau.
The city also argued that the 27th pay date “anomaly’' was an unintended consequence of the public safety fund’s board trying to comply with the literal wording of the city charter and not an intentional decision to provide pensions that exceeded their annual pay.
An arbitrator ruled that these former union members are entitled to a “prorated” pension benefit, apportioning the benefit based on the ratio of their service before they left their respective unions to their total years of service.
For example, an officer who was promoted out of the Police Commanding Officers Association to an exempt rank in 2015 after 25 years of service and then later retired in 2020 after 30 years of service would get five-sixths of the 27 pay-period increment if the officer retired during the month when a 27-pay period occurred.
The decision applies to 20 retirees who retired after Jan. 1, 2013, according to Hutchison. The $240,000 payout is on the City Council’s consent agenda Wednesday.
In addition, ongoing monthly pension benefits of these retirees and one surviving spouse will increase by roughly $200 to $400 each, resulting in an annual cost of about $75,000, according to Hutchison.
While the fund has sufficient money in its 2020-21 budget and five-year forecast to cover these extra costs, Hutchison said the long-term impact to the fund is unclear.
The pensions for future retirees who fall under this category and their surviving spouses are expected to increase an estimated 2.5 to 3.5 percent, he said.
The fund anticipates six to seven firefighters or police in this category retiring each year, continuing for the next 15 to 20 years, with their pensions lasting a median of 30 years for retirees and another five years for their surviving spouses.
©2020 The Oregonian (Portland, Ore.)