Statement From Mayor Taveras on Providence Firefighters' Vote to Approve Negotiated Pension and Retiree Health Care Reform Settlement
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Statement From Mayor Taveras on Providence Firefighters' Vote to Approve Negotiated Pension and Retiree Health Care Reform Settlement

Thursday, November 8, 2012

Providence Mayor Angel Taveras released the following statement today on the Providence Firefighters' vote to approve the negotiated pension and retiree health care reform settlement:

"I appreciate the Providence Firefighters for their vote to make needed reforms that will protect our pension system for retirees and current employees. In the last 22 months, we have come together and shared in the necessary sacrifice to put Providence on stronger fiscal ground. I am hopeful that our police will act quickly and join our firefighters, retirees and municipal employees, so we can move Providence forward and focus on the important work of creating jobs, expanding educational opportunities and improving public safety in every part of our city."

This spring, the City announced that retirees, firefighters, laborers and police had reached a tentative agreement to reform the City's pension system which was underfunded by $900 million. The settlement will generate approximately $18.5 million of savings in FY13. Officials expect that the pension reforms agreed to during mediation will reduce the City's unfunded pension liability by as much as $170 million. Additionally, the changes to Medicare will save approximately $40 million over the next 10 years.

The Agreement - Pensions:

  • COLA SUSPENSION: All COLAs suspended for 10 years. (Families of city employees killed in the line of duty will continue to receive annual COLA.)
  • ELIMINATION OF HIGH END COLAs: All 5 and 6 percent compounded COLAs are permanently eliminated.
  • PENSIONS CAPPED: In FY2023, COLAs will be reinstated only for retirees with pensions less than 150 percent the state median income (currently $82,353) OR less than the salary of an incumbent employee of the same rank as the retiree at the time of retirement (police and fire retirees only), whichever is lower.
  • FUTURE COLAs LIMITED: Retirees whose COLAs are reinstated in FY2023 will receive annual raises of 3 percent compounded or what is called for in their contract, whichever is less.
  • ONE-TIME STIPEND IN FY2017: In FY2017 (Year 5 of the agreement), retirees collecting pensions of less than $100,000 will receive a stipend of $1,500. This one-time payment will not change their future pension calculations.
  • CONTINGENT STIPEND IN FY2020: In FY2020 (Year 8 of the agreement), retirees collecting pensions of less than $100,000 may receive a separate one-time stipend of up to $1,500 if the city achieves savings through the creation of a self-insured dental plan. The potential payment would not change future pension calculations.
  • SUSTAINABLE REFORMS TO PENSION CALCULATIONS: Future pensions will be calculated based on the four highest years of service. The current system calculates pensions based on the highest three years.
  • CONTINUED PENSION CONTRIBUTIONS: Employees will be required to contribute to the pension system for as long as they earn credit toward a pension.
  • ACCIDENTAL DISABILITY: Accidental disability pension calculations will be based on 66 2/3 of the employee's final salary.

The Agreement - Healthcare (only pertains to police, fire and retiree association):

  • MEDICARE SETTLEMENT: Retirees 65 and older will move onto Medicare.
  • PART B SUPPLEMENT AND MEDICARE PENALTY: The city will provide funding to cover Medicare's Part B supplement and penalties, as had previously been committed.
  • PART D PRESCRIPTION DRUG COVERAGE: The city will also provide funding to cover Medicare Part D prescription drug coverage.
  • UNDER 65 HEALTH COVERAGE UNCHANGED: Health care for retirees under the age of 65 will not be changed.

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