Pensions (and lack of Social Security) for Police and Fire Personnel in East Lansing

Sunday, April 29, 2018, 12:48 pm
By: 
Chris Root

Are East Lansing pensions for fire and police personnel different from other City employees, and is it true our police officers, paramedics, and firefighters are not eligible to get Social Security benefits for the work they do for us as public safety officers?

Sworn police officers and firefighters constituted 104 of the City of East Lansing’s 268 employees at the end of 2016, and they continue to have defined benefit pensions. (The number of police and fire personnel has declined since then and is projected to decline further in the next two years in order to reduce costs.)

They are treated differently from most other public employees in this regard because, under a provision of the federal Social Security Act (called a “Section 218 Agreement”), they do not receive Social Security benefits for their emergency services work in East Lansing. Therefore, they rely on employer pension plans for dependable income during retirement to a greater extent than do many other people. The City’s only defined benefit plans that are still open to new hires are for police and firefighters.

This category of employees is unique under Michigan law for another reason: under Michigan’s Public Act 312, sworn police officers and firefighters are prohibited from going out on strike, so they are required to resolve contract disputes by arbitration.

In July, 2015, the State of Michigan revised its Master 218 Agreement with the Social Security Administration to make police and fire personnel eligible for Social Security coverage. This change makes it possible for a local government unit to add Social Security coverage for public safety employees, provided that they are covered by a retirement plan. This major change would require that: (a) the governing body (i.e., City Council) votes to make this change, and (b) a majority of eligible employees votes in a referendum (with a secret, written ballot) to make this change. The Section 218 agreement says that if an employee group is given Social Security coverage through this process, it could not be taken away later.

Adding Social Security coverage would mean that both the City and employees would contribute 6.2% of payroll to Social Security that they are not now paying. Presumably, the City would seek to add Social Security in order to reduce the City-provided pension. Fire and police unions would also need to agree, as a revision to their contract, to a reduced benefit in conjunction with getting Social Security. If the parties were unable to reach agreement on a change to the existing benefits, it would go to arbitration, where frequently one party’s position, rather than a compromise position, is chosen by the arbitrator. This would be a multi-step, complex process for all parties.

City Manager George Lahanas said at the February 27, 2018, City Council meeting that the cost of the pension benefit for fire and police personnel hired after 2011 “is about 60% of the cost of the former benefit – about 60% of the cost in terms of what it actually pays out over a person’s life.” He explained the reduction in benefit in “Steps Taken to Address Legacy Costs,” which was posted on the City’s website on April 24, 2018:

"...in 2010, new and current non-public safety employees had the option of moving to a Hybrid Plan (a combination defined contribution and defined benefit plan), which was identified by the State of Michigan as a cost-controlling plan under the Economic Vitality Incentive Program (EVIP). The following year, in 2011, the defined benefit plan for all police and fire new hires was significantly reduced, including a decrease in the plan multiplier from 2.75% to 2.25%, changes to overtime pay and vacation/leave time for final average compensation (FAC) and raising the retirement age from 50 to 55."

 

This article is part of a larger investigation of East Lansing's pension plans; click here to read the lead article for that investigation.

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