Denver city employees would pay more into their pensions beginning in January and new hires wouldn’t be eligible to retire until age 60 if a City Council vote passes later this month.
Denver Mayor Guillermo “Bill” Vidal sent a letter to city employees Wednesday about the proposed changes to their pension package — a plan that eight months ago was rebuffed when Mayor John Hickenlooper suggested it.
Hickenlooper’s plan was put off when officials sought more input.
Vidal’s proposed changes are nearly identical and “are prudent steps to ensure our continued ability to provide excellent retirement benefits at a reasonable cost,” his letter states.
Lifting the retirement age would save money for the city because the city would have less to pay out over time.
And raising the contribution levels would help improve the health of the city’s pension system — which as of December was 85 percent funded, down 3 percentage points from 2009.
“We would like to be north of 90,” said Steve Hutt, director of the Denver Employee Retirement Plan. “We have had great returns. But we have such a hole to climb out of since 2008.”
Vidal’s proposal must be approved by the City Council, which is expected to vote June 13.
Union officials, who balked at Hickenlooper’s plan in October, are uneasy with the new plan and are asking for the city to wait until a new administration is in place.
“They are going to have this rich pension, but no one will be able to qualify for it,” said Ed Bagwell, a business agent with Teamsters Local 17, which represents 1,000 city employees. “We need a new mayor in there; someone needs a fresh look at this before they pull the trigger.”
A new mayor will be elected Tuesday, a contest between former state Sen. Chris Romer and City Councilman Michael Hancock. The new administration will be sworn in July 18.
The retirement-plan contribution rate would increase to 16.5 percent over the current 15 percent — that 1.5 percentage-point increase would be split evenly between employees and the city.
In total, employees would contribute 6.25 percent of their salary to retirement, with the city contributing 10.25 percent.
Until 2003, city employees contributed nothing to their pension.
Also, the proposal calls for lifting the minimum retirement age to 60 from 55 for all new hires.
The plan would change the “Rule of 75” in place for current employees to a “Rule of 85” for new workers — meaning that to receive a full pension, city employees would need to retire after age 60 with at least 25 years of experience.
Current employees must be 55 with 20 years’ experience.
While its funding has dropped to 85 percent, the plan is healthier than many other public pension plans.
In December 2009, the state- employees division of the Public Employee Retirement Association was only 67 percent funded.
Ed Scholz, Denver’s chief financial officer, said the pension changes for new hires would result in a savings of about $8.5 million in 2011 dollars by the time the entire workforce is under the new rules.
“That $8.5 million could be used to address part of the structural gap in the future,” Scholz said.
The city has a $100 million budget shortfall in 2012 — $30 million of which won’t be corrected without serious steps.
Council President Chris Nevitt said he is skeptical of the changes, adding that one of the best attributes the city has to attract quality workers is the retirement plan.
“You need a good reason to (mess) with the pension,” he said. “I am a little skeptical. I have to wonder why would you go the extra mile to make the pension worse when we are one of the most solvent and successful pensions in the country and are doing more than anyone else to assure our long-term solvency? Why really chisel it down further?”
Jeremy P. Meyer: 303-954-1367 or jpmeyer@denverpost.com
