In an attempt to ebb future liabilities, the Philadelphia Board of Pensions is considering offering a cash buyout to certain retirees, and then transferring them into a less costly, less lucrative retirement plan.
The name of the new plan is Plan 87, and more than 30,000 retirees will be eligible.
From the Philadelphia Inquirer:
Officials have said that the city’s oldest pension program, known as Plan 67, is too costly and one of the reasons the program is in such dire shape.
If everyone in Plan 67 were to convert to the city’s less costly plan, Plan 87, the city could reduce its unfunded liability by $1 billion, according to an actuary report presented to the Pensions Board on Thursday.
Controller Alan Butkovitz is suggesting that a onetime cash incentive be offered to any Plan 67 member who switches to Plan 87.
“In order to move forward with this proposal, I am requesting that the Pension Board conduct a survey of active and inactive members of the Plan 67 to gauge interest of how many would opt for the [Employee Pension Income Conversion] Plan,” Butkovitz said in a letter Wednesday to Fran Bielli, the Pensions Board’s executive director.
The actuary’s report gives numbers for various scenarios depending on percentage of participants and payout percentages ranging from 25 percent to 70 percent. Butkovitz’s office focused on giving retirees an up-front cash payment of 50 percent of the difference between what a retiree would get in Plan 67 and Plan 87.
For example, a city accountant with a final salary of $50,000 and 20 years of service could receive a $20,007 cash payment in exchange for reducing his or her lifetime pension from an annual $25,000 to $21,000.