Split City Pension Board Recommends 5-Year Service Credit Buy-In
Commission to Make Ultimate Decision
Last updated 2/19/2020 at 4:56pm
In a split 3-2 vote the City of Lake Wales General Employee Pension Board agreed Friday Feb. 14 to recommend to the city commission that they allow employees to buy up to five years of service credit for their work for other governmental entities in Florida.
Pension Board Member Sarah Kirkland, the city's utilities director, said she was prepared to vote "no" until Deputy Mayor Robin Gibson made the case that because of politics, especially in small towns, few city managers could ever complete the 10 years' service required to become vested in a defined benefit pension plan. Gibson is the commission's representative on the pension board. Kirkland said the fact that her boss, City Manager Ken Fields, was there advocating for the change that could benefit him, didn't factor into her decision.
Deputy City Manager James Slaton and former city Commissioner Linda Kimbrough voted against the proposal. Kimbrough said she opposes changes that primarily benefit the city's highest paid employees and she wants to see more done for the lower paid employees. Slaton said he understood that the change might help with recruitment but he wants to encourage employees to stay with the city long-term by making at least a 10-year commitment to obtain a pension.
Fields downplayed that he personally could take advantage of the service credit buy-in and spoke at length about how the change would help the city recruit new employees who have some experience with other cities. Fields said the next generation of millennial employees change jobs more often, so the buy-in could be an inducement. Pension Board Chair Violeta Salud cast the deciding vote in favor of recommending the buy-in, but the ultimate decision lies with the city commission, which will need to hold two public hearings on the proposed change.
Fields stressed that the buy-in would cost the city nothing since the city's actuarial consultants would determine the amount they estimated would fully cover the cost of the retired employee's future benefits. The city's actuaries have determined 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 could be close to $45,000. If he collects for at least 15 years the cost to the city pension plan could exceed $675,000.
Gibson said he has to trust the actuarial consultants to determine the buy-in payment that is expected to be invested to cover the entire cost of future benefits.
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.
On a second issue, the pension board voted unanimously to recommend that the city commission allow employees reaching the $75,000 pension cap to start paying into a 401(A) retirement fund, but they agreed the city commission should determine an appropriate level contribution from the city. The only two city employees to reach the cap, established in 2013, are Police Chief Chris Velasquez and Fire Chief Joe Jenkins. Police and fire employee pensions are overseen by two other boards, but the general pension board was asked for an opinion since general employees could take advantage when they reach the cap. 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.
Gibson said the city commission would need to decide what contribution level they felt was appropriate. 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 general city employees hit the $75,000 pension cap.