City Manager Seeking "Buy-In" to Get Lifetime Pension
Could Collect $675,000 Over 15 Years
Last updated 2/12/2020 at 10:41am
Lake Wales City Manager Ken Fields is proposing two changes to the city's pension rules. One would enable him to get a lifetime city pension worth potentially more than $600,000 without completing the minimum 10 years of service with the city.
The other change would create investment accounts for Police Chief Chris Velasquez and Fire Chief Joe Jenkins, whose retirement contributions have been stopped because they are the first two city employees to reach the $75,000 pension cap adopted in 2013.
If Fields' request is approved, he could "buy" up to five years' of service from previous Florida government positions to become vested in the city plan. When Fields' contract expires in 2022 he would be two years short of the 10 required for a city pension. Like many city managers, he never stayed in one position long enough to become vested in a traditional defined benefit pension plan.
When he was hired in 2013 Fields opted out of the city's general pension plan and instead chose to invest in a 401(A) retirement plan and a 457 deferred compensation plan. In six years the city has contributed a little over $176,000 into the two plans and Fields has added about $145,700, for an estimated total of $321,700.
According to the city's actuarial consultants, Fields would need about $307,000 to buy into the city's pension plan with the equivalent of 12 years' service. With an average salary and additional compensation of a little under $150,000 and credit for 12 years at 2.5 percent per year, Fields' annual pension would be close to $45,000. If he collects for at least 15 years the cost to the city pension plan could exceed $675,000.
If the city commission approves the buy-in for Fields he also would be eligible to enter the city's DROP program, which gives him a deferred retirement option. He could immediately be considered retired and his pension would start going into an interest-bearing account while he continued to work and collect his full salary. He would take about $90,000 in DROP funds plus interest with him if he left the city's employ in 2022.
Fields brought the service buy-in proposal to the city commission Feb. 4, but Deputy Mayor Robin Gibson, who represents the commission on the general pension board, held up the vote saying he wanted a recommendation from that board. Gibson said he volunteered as the commission representative to the general pension board because of his concerns about its long-term health.
"The pension funds are backed by the full faith and credit of the City. Thus, if something goes wrong with the pension funds, the citizens are ultimately responsible for all unfunded liabilities --- and I feel a responsibility to those citizens for that not to happen," Gibson said, noting the commission meeting is where he prefers to express his opinions and hear the viewpoints of his fellow commissioners. Either change would require commission approval.
Pension board members, including former city Commissioner Linda Kimbrough, said their reaction was negative when they heard about the buy-in plan, and they were surprised Fields bypassed them by bringing it to the commission before they were able to make a recommendation.
"They sent it straight to the commission, which is wrong," Kimbrough said. "The pension board needs to make a recommendation before it goes forward."
City Human Resources Director Sandra Davis said she thought it was just a misunderstanding, not an attempt to bypass the pension board. The agenda item was Fields' idea, but he suggested the buy-in would help with recruitment of people who had worked for other government entities.
Kimbrough said she objects to changes that only favor the highest paid city employees. "I have a problem with it because I think of our lower paid employees. They don't have the money to buy in like that. They're actually out there making the city look good, laboring out in the sun. We need to do more for them."
The proposal to create 401(A) retirement accounts for employees reaching the $75,000 cap is still being massaged. The original proposal Fields brought to the commission recommended allowing the two chiefs to start putting 5 percent of their salaries into a 401(A) retirement plan, with the city contributing at the same rate it did before they hit the cap, 16.7 percent for police and 26 percent for fire. Officials are now considering a lower city contribution.
The two chiefs are among the highest paid city employees, with Velasquez earning $112,500 per year and Jenkins $98,000. They hit the cap because of their length of service; police and firefighters get 3 percent credit for every year of service, while general employee pensions are calculated at 2.5 percent times the years of service. Both are multiplied by the average of their top five years to calculate their annual pension benefits. Davis said it likely will be at least 10 years before any other city employees hit the $75,000 pension cap.