cut retirement benefits

Fort Worth Firefighters To Sue City Over Benefit Cuts

The Fort Worth firefighters union announced plans Tuesday to file a lawsuit against the City Council over a series benefit cuts that would scale back retirement benefits for new hires.

The union claims the cuts represent a breach of contract and a violation of the Texas constitution.

From the Star-Telegram:

The president of the Fort Worth Professional Firefighters said Tuesday night that the group plans to move forward with a lawsuit against the city over the benefit reductions that the City Council approved by a 6-3 vote.

“When these pension changes go into effect, it will be a taking. We will be joining the police officers in that federal suit,” said Jim Tate, the association’s president. The group must vote on filing the lawsuit, Tate said.

The cuts will affect firefighters hired before Jan. 10, 2015, and include reducing the multiplier used to calculate benefits from 3 percent to 2.5 percent, using the high five years instead of three years to determine retirement pay, and eliminating overtime that is not built into a firefighter’s salary from calculations.

[…]

The lawsuit accuses the city of contract impairment, violation of due process, unlawful taking of property, and violating the U.S. and Texas constitutions in reducing pension benefits for future service. The council reduced the multiplier used to calculate benefits, raised the number of years for retirement pay and eliminated overtime from calculations.

City Manager David Cooke said that the situation between the two groups is not “combative” but that “we both agreed to let the courts decide who is right.”

“One of the challenges certainly is we are in litigation with the police over our ability to do what we already did. The firefighters have simply said they are going to join the police and see what the courts will actually decide,” Cooke said.

City Council members, who passed the benefit cuts by a 6-3 vote, weighed in on both sides of the issue. From the Star-Telegram:

“It does put the fire on par with the rest of our employees, and going forward this is all going to get resolved in federal court. We believe that putting them in the same plan with the rest of our employees is the proper thing to do at this time,” said Councilman W.B. “Zim” Zimmerman, who voted for the reductions.

Council members Jungus Jordan, Ann Zadeh and Kelly Allen Gray voted against the changes.

“On the vote to make changes for new hires, it was a little easier for me. But making changes to people who already have pensions they are depending on in place, that is a little bit harder for me to do,” Zadeh said.

Tate said the reductions will force firefighters to retire later to maintain their current benefits. The current average retirement age is 59, he said, but he expects that to jump into the 70s.

“I feel bad not only for the firefighters but for the citizens of this city that the interest of the wealthy business owners takes precedence over the citizens who are going to be served by these elderly firefighters in the years to come,” Tate said.

Union members still must vote to approve the lawsuit.

State Law May Stand In Way of Phoenix Pension Cuts

A Phoenix ballot initiative – titled Proposition 487 – would block off the city’s traditional pension system from all new hires, and instead shift those employees into a new, 401(k)-style plan.

The measure, if passed, would not apply to the city’s police and firefighters. But opponents of the reform are now saying that a legal quirk could end up blocking benefits for all of the city’s 4,000 police officers and firefighters. Reported by the Arizona Republic:

The initiative targets the retirement plan for general city workers hired in the future. Although the measure’s preamble states it’s not intended to affect first responders, attorneys for Phoenix have said the actual language, specifically the amendment to the City Charter, is poorly written and could wind up blocking pension contributions for existing and future police and fire.

However, several areas of state law, including the Arizona Constitution and provisions creating the Public Safety Personnel Retirement System, could prohibit Phoenix from ever withdrawing from the plan or diminishing retirement benefits for existing employees, attorneys said.

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[Attorney Robert] Klausner said the likely result is that the Public Safety Personnel Retirement System would have to sue Phoenix or stop crediting its police and firefighters for additional years of service. Ultimately, he said, the city is in an “impossible conundrum” that it would probably lose.

“No matter what you do, you’re violating the law and welcoming a lawsuit,” Klausner said. “All that does is make lawyers really happy.”

Proponents of the reform measure have accused opponents of “scare-mongering”. From the Arizona Republic:

Scot Mussi, chairman of the group, said it’s clear that the city could not legally stop its payments to the state pension system. He said “scare mongering” Phoenix officials have suggested it could apply to public-safety workers to trick voters.

“That’s just crazy,” Mussi said of the argument regarding police and firefighters. “It would be unconstitutional. It would violate state law, and it goes against what’s expressed in the initiative itself.”

The fight over the measure has been going on for several weeks now. Opponents had earlier claimed that the measure would also unintentionally cut benefits for disabled workers.

Moody’s: Undoing Retiree Cuts Would Spell Bankruptcy For Flint

Detroit isn’t the only Michigan city having a hard time financially. Flint, a smaller but similarly distressed city, has toyed with the idea of bankruptcy for months.

The city cut retiree benefits in an attempt to improve its fiscal condition, but a lawsuit over those cuts is waiting in the wings.

Moody’s has now said that the city is unlikely to face bankruptcy – but if retirees win their lawsuit against the city, that outlook could change. From Michigan Live:

Flint and Detroit have many similarities, but bankruptcy isn’t likely to be among them, according to an analyst with Moody’s Investors Service.

David Levett, writing in the Sept. 11 issue of U.S. Public Finance Weekly Credit Outlook, says Flint is unlikely to follow Detroit’s path into bankruptcy in the near term, especially if the courts allow the city to keep benefit cuts to retirees in place.

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Earlier this year, Earley himself raised the possibility of bankruptcy for Flint if it loses a lawsuit filed by city retirees, which seeks to maintain the health benefits that workers retired with.

Levett’s analysis credits Flint’s emergency managers with having “substantially improved financial operations with dramatic changes, including restructuring pension benefits, outsourcing services, eliminating 20 percent of the city’s workforce and reducing total employee compensation equivalent to 20 percent of wages.”

He says Flint’s financial progress “would be derailed” if cuts to retiree benefits are overturned.

“The city would face substantial financial pressure should the benefit cuts not stand, increasing the likelihood of a bankruptcy filing … If the city ultimately loses the challenge, annual expenditures would increase by $5 million, equivalent to 8 percent of 2013 revenues,” the report says.

Flint Councilman Joshua Freeman was not so optimistic. In an email to Michigan Live, he said he sees “no clear path forward that does not include bankruptcy”.

Berkshire Hathaway Sued By Subsidiary Over Retirement Benefit Cuts

Workers at Acme Brick Co. say Berkshire Hathaway promised not to scale back retirement benefits when it bought the company in 2000.

Since then, Acme Brick employees have had their pensions frozen and been subjected to other rollbacks in retirement benefits. So they have sued Hathaway, the holding company run by Warren Buffett, for breaching its alleged promise. Reported by the Star Telegram:

Two employees and a retiree of Fort Worth-based Acme Brick Co., including the company’s chief financial officer, have sued the company and its parent, Berkshire Hathaway, alleging the company improperly reduced the company match on its 401(k) retirement plans and froze its pension plan.

The class action suit, filed Aug. 15 in U.S. District Court in Fort Worth, says Berkshire Hathaway, run by multi-billionaire Warren Buffett, broke a pledge it made when it acquired Acme with Justin Industries in 2000 not to reduce benefits in the company’s retirement plans.

“Since that time, the employees have stuck with the company through good times and bad, in anticipation that their benefits under the Retirement Plans would ultimately compensate them fairly,” the lawsuit says. “Now, almost 14 years later, Berkshire Hathaway has broken its promise.”

Acme Brick’s senior management on July 15 voted to make changes to the retirement plans urged by Buffett, Berkshire’s chief executive officer, and Marc Hamburg, its chief financial officer. Otherwise “Berkshire Hathaway intended to divest itself of Acme as a subsidiary,” the lawsuit says.

The class-action lawsuit alleges that Berkshire Hathaway violated the Employee Retirement Income Security Act (ERISA) when it cut benefits.