Some Minneapolis cops could get pension of $64,000 a year

Some Minneapolis cops could get pension of $64,000 a year

Steve Brandt
Minneapolis Star Tribune
May 18, 2011

The full pension for police in a closed Minneapolis pension plan would jump by 43 percent to $64,000 annually within four years under a merger deal that the city nevertheless calculates would save it millions of dollars in the long run.

The tentative deal would increase the full pension from the current $44,742 annually in four steps by 2015. The boosted pension base is intended to offset the lower post-retirement raises awarded by the statewide police and fire plan into which the Minneapolis Police Relief Association would merge. Police hired after mid-1980 already belong to that plan.

But even with retirees getting higher payments, the city still would save $34 million over the next 20 years, according to city calculations, because the merger would allow it to use more favorable assumptions about investment gains and salary increases. The $34 million represents the city's calculation of the present value of the future payments it would escape.

Meanwhile, City Council President Barbara Johnson said a tentative merger agreement has been reached with the smaller and better-funded fire pension plan, as urged by a number of Minneapolis legislators. She said the city hopes that a meeting to consider both mergers will be called for Thursday by the Legislature's pension commission, which previously said it was adjourned for the session.

Members of the police fund board voted informally 5-2 to accept the tentative agreement, which was worked out last weekend and still needs legislative approval. But Mike Sauro, the board member representing the eight not-yet-retired police officers in the plan, is campaigning against a merger.

"I did not want to do this, but at this point I felt I had no option," said Sauro, a lieutenant. "The price is too low right now."

Sauro said he prefers that police wait for the Minnesota Court of Appeals to rule on a fund challenge to a lower court ruling that stripped police and fire pensioners of about $10 million annually in benefits in a dispute over the proper compensation base. That decision is due by mid-June, but the lawsuit would be dismissed under a merger.

A fund board committee met Tuesday to discuss the terms of the proposed merger and voted for the proposal. But it will meet again on May 26 to act formally.

The city's offer essentially gives back some of what it won in the lawsuit as a sweetener to police to join a statewide pension plan that gives limited cost-of-living raises to retirees. Benefits from the state plan go up by 1 percent this year and next, then rise with inflation to a 1.5 percent annual cap until that plan is 90 percent funded, then revert to a previous cap of 2.5 percent.

In contrast, the local fund's pension rises by the annual percentage increase in the pay of a top-grade patrol officer. When investments top salary growth by 2 percentage points, pensioners get up to another month's benefit in a lump sum. There are potentially bigger lump-sum payments if the plan becomes slightly overfunded. Those would cease under a merger.

Younger active and retired police officers worry that the state plan won't keep up with inflation over time. "I never expected to get rich on this pension," Sauro said. "I never expected to get poor on this pension. I just expected to maintain my standard of living for the rest of my life."

But that standard would slip under the state plan, with a just a 2 percent annual increase in the cost of living, he said.

That's insane. Absolutely insane. Reading the comment on the story by reader confirmed my statement.

My mom retired from the federal government in late 2009. With her social security and federal pension combined, she gets only $24,002 a year.