Lexington’s police and fire pension, which has a $296 million unfunded liability, will be set on a sustainable path under a consensus plan agreed upon by the mayor, representatives from the police and fire unions and representatives from the city’s pension board.
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The plan, recommended by the city’s pension consultant, will immediately cut the city’s unfunded liability by approximately 45 percent. The plan includes lower annual cost-of-living adjustments, increased contributions from active and future employees and a remodeled new-hire plan. The city agreed to increase its payments to the Policemen’s and Firefighters’ Retirement Fund by $9 million a year and bind itself to paying down the unfunded liability over 30 years.
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Under this agreement,
“The men and women of the police and fire pension system, active and retired, have shown both their commitment and sacrifice by voting for and accepting the concessions made in order to sustain this pension, not only for themselves but also for our future retirees,” said Lexington Fraternal Order of Police President
“This was not easy, but in the end we have a plan that finally puts our pension fund on sound footing, ensuring that it will continue to support the retirements of Lexington’s police officers and firefighters for decades to come,” said Capt. Chris Bartley, President of Local 526, International Association of Fire Fighters.
Under the new plan, the city’s annual payments would be $20 million per year, up from the $11 million per year it had been contributing supplemented by pension-obligation bonds. The new payment schedule and methodology shifts the city’s payment plan from interest-only to paying down the principal. Paying down the unfunded liability over 30 years without the benefit changes would have cost the city $34 million a year.
“With this legislation the pensions of the brave men and women in our police and fire departments will become sound,” said Rep. Ruth Ann Palumbo. “These public servants put their lives on the line every day to protect us and deserve a secure retirement plan.”