September 14, 2008
Some Former City Employees Irked By Cuts in Pension Checks
By JEN MCCAFFERY
By Jen McCaffery
Just before retired City Manager Luke McCoy turned 65, the city sent him a letter. His pension would be reduced as soon as his Social Security benefits kicked in, it said.
Retired public utilities dispatcher Peggy Preddy's letter didn't arrive until she turned 68. She watched her monthly net pension payment shrink from about $1,100 to $366. Because of the change, her annual income is now nearly $8,500 less than it used to be.
Roberta Riddick, a retired 29-year employee of the city's finance department , saw her monthly net pension payment decrease from about $1,240 to $690.
Also at issue are cost-of-living adjustments that the retirees say they received in the past but were eliminated when their Social Security reductions kicked in.
Led by McCoy, the former city employees and a group of other retirees want the City Council to eliminate the reductions for Social Security and reinstate the cost-of-living adjustments .
Betty Burrell, the city's chief financial officer, has said that the request could cost the city millions. She also said in a presentation to the council in July that the retirees acknowledged in writing that they knew their benefits would be reduced once they began receiving Social Security.
The retirees deny that they ever acknowledged the reduction and say they would like the city to produce proof. They have spoken to the council about the issue at meetings over the past few months.
As a result, the city has held a couple of forums on its retirement programs and the council recently appointed a committee to examine Portsmouth's supplemental retirement system and return with recommendations.
Vice Mayor Bill Moody Jr. said he's anxious to review the committee's findings. However, he said, he has already stated publicly that the retirees' cost-of-living adjustments should be reinstated.
The adjustment would mean a change to the city code, which states that an employee's retirement income is determined by applying a formula to their final compensation . It does not include cost-of- living adjustments.
According to Burrell's report, which she made with Toni Smaw- Bembry, the city's director of human resource management, Portsmouth's pension programs are already underfunded by more than $137 million.
The city has designated $22.8 million out of its $562 million budget for pensions this fiscal year, which began July 1.
Eliminating the Social Security reduction could cost the city an estimated $24.6 million, according to the report.
As of July 1, 2007, Portsmouth's supplemental retirement system included 357 retired participants and beneficiaries and 92 active employees, according to Burrell's report. The system also includes another 60 vested employees, McCoy said.
Burrell said employees signed up for the supplemental system in 1984. Back then, employees were asked to choose between the city's supplemental program or the state system, then known as the Virginia Supplemental Retirement System. Sworn public safety officers are under separate city retirement systems.
McCoy said he doesn't remember why he selected the city's program. "There wouldn't have been any reason for us to stay in the Portsmouth system if it was not going to be an equal system," McCoy said.
He recalls showing employees the benefits of staying in the Portsmouth system versus the state program.
Many supervisors told employees that people with five or more years of experience would be better off staying with the city plan, Larry Scott, a retired 20-year public utilities employee, recalled.
Scott, who was a supervisor at the time, remembers being told Portsmouth's system would mirror the state's program.
About 545 workers opted to transfer to the state system, Burrell said. The city closed its supplemental pension system in December 1984, she said, though council members are still allowed to join.
McCoy said that, in hindsight, the city should have ended its pension program and made employees join the state system. The state program has never reduced benefits because of Social Security, Burrell and Smaw-Bembry's presentation noted.
Jen McCaffery, (757) 446-2627,
The city says the retirees initially agreed to have their pension payments reduced when they became eligible for Social Security. Now they want the City Council to restore the full pension payments. But an official says that could cost the city millions.
Originally published by BY JEN MCCAFFERY.
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