Tempers flare, MFPD board members take heat over proposed disability plan
July 06, 2005 - Tempers flared during a recent meeting of the Mehlville Fire Protection District Board of Directors and board members were the ones taking the heat.
In a last-minute move, the board decided to discuss an amendment to remove disability benefits from the district's pension plan and approved it 2-1 with Secretary Dan Ottoline Sr. opposed.
The amendment sought to remove disability benefits from the pension plan for injuries that occurred after July 1. Under the amendment, disability benefits would be covered by the Standard Insurance Co., a change the board unanimously approved in early June.
Besides covering on-duty employees, the new plan would extend around-the-clock coverage to employees, but would reduce maximum benefit payments by 15 percent.
However, St. Louis County Circuit Judge Barbara Ann Crancer granted a temporary restraining order prohibiting enactment of the amendment until July 15 when a hearing will be conducted on a lawsuit filed by Mehlville Local 1889 of the International Association of Fire Fighters. The lawsuit seeks to prohibit the board from implementing the contract with Standard Insurance.
The disability amendment was included as a discussion item on the agenda for a Pension Committee meeting scheduled to follow the board meeting. However, at the be-ginning of the June 20 board meeting, Treasurer Bonnie Stegman motioned for the disability item to be moved from the Pension Committee's agenda to the board's agenda.
"The Pension Committee is a recommending body so even though whatever would have been recommended out of that pension meeting eventually would have to go on to the board for a vote, and since we had discussed this previously in several meetings, and we had already voted to do it, it was just a matter of doing the other end of it so we wouldn't have double coverage," Stegman said.
Before voting on the amendment, board members asked Pension Committee members to provide their input.
"I think you're violating our contract altogether," Pension Committee member Dan Rosenfeld said. "The plan that you're putting in place is inadequate. I don't think it provides for the families of employees of this district in any way. I think it's awful. I don't think there's any need for it. I don't think we've had sufficient time to sit down and discuss it."
From that point on, the audience, comprised of firefighters and people who identified themselves as family members of district employees or taxpayers, broke out in applause after various speakers opposed the change to the pension plan and the board's action. The meeting often was interrupted by people who yelled at the board or requested to speak. Chairman Aaron Hilmer and Stegman told the speakers to wait until the public comment period, which was scheduled toward the end of the meeting.
"I didn't think I would live so long as to see a pension plan gutted by new directors, especially when they ran on a different platform ... We're going to try an injunction to stop this. If that doesn't work, we're going to try a recall election, whatever it takes,'' said John Goffstein, an attorney representing Mehlville Local 1889 of the Internation-al Association of Fire Fighters.
Since the board voted unanimously June 6 to approve the separate disability benefit plan under Standard Insurance, employees have been covered by two disability plans.
Hilmer and Stegman have said at board meetings that the district currently is liable for the original disability benefits under the pension plan and they aim to eliminate that risk.
From 2003 to 2005, the district paid nearly $950,000 in benefit payments from the pension fund to current disability recipients, Comptroller Jeff Geisler said.
"If multiple employees became disabled, it could have a devastating effect," Geisler said.
Under the new plan, disability benefits would cost the district $34,000 each year. The new plan also would re-move the liability from the pension fund and the district.
"The disability is no longer self-funded," Hilmer said before the restraining order was granted. "The determination if someone is disabled and to what extent is no longer under the board's hands."
Under the old disability plan, disabled employees could receive up to 75 percent of their pre-disability salary based on their years of continuous service. For example, em-ployees who had 10 years of service would continue to re-ceive 26 percent of their pre-disability salary and employees who worked 31 years would receive the full 75 percent. A disabled employee also received a $500 monthly supplemental pension benefit.
Based on an example provided by Geisler, if an employee earned an annual salary of $70,000, the estimated average salary in the district, and became disabled after 31 years of service, the employee would receive 75 percent of his or her pre-disability salary, or $52,500, plus $6,000 of the supplemental benefit. Once taxes were subtracted, based on an estimated 31 percent tax bracket, the disabled employee would receive $40,365 yearly.
Under the new disability plan, when an employee is disabled, he or she would receive 60 percent of the pre-disability salary regardless of how many years of service he or she accrued. The plan does not provide a $500 supplemental pension benefit and an employee could earn a maximum yearly disability of $72,000. Payments also would be adjusted according to the Consumer Price Index.
Based on Geisler's example, an employee earning an annual salary of $70,000 would receive $42,000, which would total roughly $28,980 after the 31 percent tax was subtracted.
The new disability benefit package would include offsets not contained in the old plan. The 60 percent salary benefit is the maximum benefit and would be offset by workers compensation, Social Security and any wages earned at another job.
"This plan is terrible — 60 percent. First of all, if somebody is disabled, they're probably not going to be able earn any more income, plus they're more of a burden on their family," Rosenfeld told board members. "It's going to cost more to provide for them, and we're going to cut their benefits down."
Standard Insurance has a work-assistance provision that provides training for new skills so disabled employees can return to work.
"And the big thing is, under the previous plan, there was no incentive to return to work, either in work in your previous capacity or in a related occupation," Hilmer told the Call. "They (Standard Insurance) want to help people lead an active lifestyle and get back to work and to help them get work that is related to their background or education."
Geisler recommended to the board at the last Pension Committee meeting that the district make the disability benefit tax free, which would cost the district an additional $4,000 each year. For that cost, an employee would receive the full 60 percent of his salary. Under Geisler's previous example, the employee would receive $42,000 instead of $28,980. The board has not discussed this option yet.
One complaint raised by Pension Committee members was that the new plan would not provide health insurance or life insurance. The former plan also did not provide either form of insurance, but the $500 monthly supplement was intended to offset the cost of health insurance and the survivor benefit option would have provided monthly payments to the disabled employee's spouse after the employee's death.
The new plan would not include a survivor benefit op-tion. Once a disabled employee dies, his spouse or unmarried children under the age of 25 would receive the next three months of disability payments and then the disability benefit will cease.
"If I die, six months, a year later, my spouse is going to get three payments, well, that's probably 60 percent of what it's going to cost to bury me," Rosenfeld said. "That's pretty poor. That gives me a lot of assurance, and a lot of backing to know, come to your job, but don't get hurt or messed up."
Under the old plan, if an employee chose the disability joint and survivor annuity, the monthly benefit payment to the employee would be reduced, but once the disabled employee died, his or her spouse would continue to receive payments until he or she died. Employees could elect for their spouse to continue receiving either 50 percent of the monthly disability benefit or for a larger price, 100 percent.
Geisler said few employees chose the survivor annuity in the past because it was more cost effective to just buy life insurance. He said that an employee with a pre-disability income of $70,000 and 31 years of service would see his or her annual disability income reduced by $7,000 to continue 50 percent payments or $13,000 to continue the 100 percent payments.
"Anybody that applies for disability or retirement I generally point out the fact that this is what it's going to cost you to take the survivor benefit, and life insurance might be a better option for you," Geisler said. "But I don't know their situation, if they do take survivor benefit, maybe it's because they can't get life insurance because most life insurance requires a physical, and for someone who's on disability it could be a problem."
The two disability plans also are different when it comes to retirement. Under the old plan, employees who became disabled would remain on disability until age 58 when they converted to normal retirement as if they were an active employee.
With the new plan, disabled employees would be paid disability benefits until age 65, when they are eligible to receive Social Security. They no longer would be considered employees of the district and therefore would be ineligible for retiree status within the district. Instead, employees would be paid their accrued pension benefit when they first become disabled.
The two plans also have a different method of determining if an employee is disabled. Before, a medical board of three doctors would determine whether an employee was disabled and then the board would make the final decision on whether or not the employee may go on disability.
Under the proposed new plan, the board is not involved in the determination. In-stead, Standard Insurance would determine an employee's disability status based on information provided by the district, the em-ployee and the employee's physician.
"Obviously, everybody wants the best benefits they can get, and I don't blame them, I would too, but monetarily, realistically, it's just not possible," Stegman said before the restraining order was granted. "And the whole point is to make sure that that pension is there for them when they go to retire.''