A recent surge in the number of firefighters retiring with disability pensions might be the reason for a 30-percent increase in the town’s annual obligation to a retirement fund, according to Mayor A. Ralph Mollis.
Town officials were studying the issue late last week in an effort to pin down a precise explanation for a $126,000 increase in the town’s contribution to a state-run retirement fund for firefighters.
The town expects to pay $541,000 into the state fund this fiscal year, Mollis said. The amount was $415,000 in the budget year that ended June 30.
Twenty-one firefighters have retired within the past five years and nine of them received disability pensions, according to records on file at Town Hall.
The state Employees’ Retirement Board determines the town’s annual contribution through a series of calculations. The board also decides if firefighters qualify for disability pensions.
But the town pays a big part of the bill. This year, its contribution represents 11.55 percent of each firefighter’s salary. Each firefighter will contribute 8 percent.
In general, retired firefighters are eligible to receive 50 percent of their salary after a 20-year career and 75 percent after 30 years.
The disability pension pays around 67 percent of the firefighters’ salary.
Mollis said he figures the pension fund sustains a loss if a firefighter retires early, and receives that much pension without contributing into the system over a longer span of time.
Firefighters easily qualify for such a benefit because almost any health issue — including pneumonia — is considered job-related, Mollis said.
“I’m glad this is coming to light,” he said. “We’re not saying the firefighters themselves are doing anything wrong. But I personally feel this is something that needs to be addressed.”
Mollis stressed that the rise in pension disabilities may not be the sole reason for the increased contribution.
“I obviously have a concern that there are more disability retirements than normal retirements,” he said, “that the presumption of disability could be having an adverse effect on the retirement system.”
James Grande, president of the firefighters union, said the disability pensions partially explain the increase in the town’s obligations.
“They do contribute somewhat to it,” Grande.
“That is like a vacuum so to speak, and it immediately becomes a drag on the pension system,” Grande added.
However, Grande also attributed the bigger obligation to lackluster profits on Wall Street and the town’s decision to staff the Fire Department with 10 fewer firefighters last year.
The town’s obligation to the fund was less last year because it had fewer firefighters, Grande said.
Also, during the stock market’s boom years, the town paid almost nothing into the system, Grande added.
“When you have it good you have it good,” he said, “and when you have it bad you have it bad.”
He noted that each firefighter has paid 8 percent of his or her salary into the retirement fund every year, regardless of stock performance.
Analysis compiled in 2003 by the Municipal Employees Retirement System shows that the firefighters’ retirement fund had an unfunded liability of about $1.3 million.
An unfunded liability is a projected shortfall. It represents the difference between the retirement fund’s projected assets in the future and its projected obligations.
The fund’s assets were projected at $20.2 million, and its total projected obligations, or accrued liability, was projected at $21.5 million. The report used actuarial techniques to calculate each of those numbers.
In 2003, North Providence had a total of 27 retirees and beneficiaries receiving retirement benefits. The average monthly benefit was $1,924.
Only three other funds for firefighters had higher average payouts, and each of those funds was serving fewer than three beneficiaries.
North Providence must set aside more than $541,000 for the firefighters’ retirements this fiscal year.
The retirement fund is slated for an additional $227,000 in town contributions that fall outside the requirements of the state retirement system.
That money — including adjustments to account for the cost of living — are required by provisions in either the firefighters’ contracts or state law, Mollis said.