The actuary for the retirement system estimated today that a controversial benefit allowing employees to artificially inflate their years of service for the purpose of calculating their pensions created $146 million of the city’s total pension deficit.
Under the program, an employee can purchase up to five years of service at a specific rate, based on a percentage of one’s salary, in order to bolster future pension pay. For example, someone who works for 20 years and purchases five years will receive a pension reflecting 25 years of service.
The program was discontinued for newly hired employees by the City Council in 2005. But the paperwork that’s needed to end it had languished with City Attorney Mike Aguirre, who believed tinkering with the program could hurt his sprawling pension lawsuit.
Mayor Jerry Sanders said he is “angered” by the news and asked Aguirre to advise him on how the city can take “unilateral action” to reset the prices so the benefit is cost-neutral. The city is currently mired in a $1 billion pension deficit.
The retirement board, according to a news release, has decided to keep its current rates for the service credit until next summer, at the earliest, when a new study of the pension fund is released. The board will hold two meetings to collect public input on the matter.
You can read the actuary’s study here.