Where is the Leadership?

Ditch the pension plan and institute a 401K program, RTC chairman advises.


To the Editor:

Democrats have led Hamden in the last 23 of 25 years. I believe for the entire 25 year period the pension plan has been an issue with each and every administration. To-date, even in the face of a complete pension meltdown, the Democrats are still studying the issue. Does this sound like leadership to anyone?

Let me give you several examples of what I mean by listing short excerpts from what was reported in the New Haven Register:

1. In a little over three years, the corpus disappears (meaning the pension is depleted)

2. The town needs to keep up funding levels or its bond rating could worsen

3. Future budgets would need to cover the cost of the pension obligation bonds debt service for the full actuarial amount.

4. The Hamden Retirement Board July 2010 report said four years were left in the fund. It recommended a contribution that year of $19 million.

5. The town never fully funded its obligation.

Summarizing the above we see that the town has known about the problem for years. The fund is about to be depleted and the same party that created the problem is struggling to find a solution that has eluded them for nearly 25 years.

The situation is urgent requiring immediate action. So what does this team come up with for a solution - spending more money to study the problem further. Again, does this sound like leadership to anyone?

Here is what I propose. First, anyone who is receiving a pension – no change to the plan. Second, anyone with more than 10 years of service – no change. Finally, anyone with ten years or less of service, keep what you built up, but that is the end of the line for the old pension plan.

Going forward, the existing pension plan is terminated. As a result, the future unfunded liability is substantially diminished. We move to a plan similar to a 401K with matching contributions. The pension plan becomes completely portable and is managed by professionals or by the employee– their choice.

With the above changes you bond what’s left, while simultaneously greatly reducing the town’s future liability. In the end, what remains is a plan the town can afford and taxpayers can pay.

The difference between leadership and the nonsense demonstrated to-date is that discussion must lead to decisive action. So far, we haven’t seen any.

Ron Gambardella
Republican Town Committee chairman 

George Levinson May 16, 2012 at 06:08 PM
Firstly, I like the idea of ending the pension plan as we know it. Conversion to a 401K type plan would only make sense if it applied to all current employees, not just new ones or those of limited service. Remember that for several years all new employees have been passed to the state. No argument that those already retired should continue their pensions, altough reductions in COLA should be considered even for them. The 10 year cutoff Mr. Gambardella proposes would remove only a small number of people. There are about 1250 people total in the plan, roughly half already retired and half yet to retire. My guess is that there are only 100-200 in the less than ten year category. The only logical path is to expect the plan members to make substantial concessions. Everyone including already retired loses COLA and those yet to retire start collecting at an older age (65?) unless they accept reduced benefits for collecting earlier. Look at the way private sector retirements are given. It's not complicated. It's simply fairer.
Thomas Alegi May 16, 2012 at 07:07 PM
Pensions are so confusing I hope I state this correctly, if not please correct me. Some companies use a formula: age plus years of service has to equal 75, before their employees can receive a full pension. For those who want to retire early they would loss 4% a year of their full pension if they retired before age 65. So if employee wanted to retire at age 62 and not age 65 they would lose 12% of their pension if they met the equal 75 requirement. Is the town of Hamden employee pension written something like this?
Charles Baltayan May 16, 2012 at 07:12 PM
Bonding is not an option or necessary. The Pension Plan has a clearly defined method of termination which is fair to all members and should be followed in order to be fair to all, taxpayers included. Those that are receiving benefits will convert their share of the plan into whatever retirement vehicle (401K, etc.) is best for them and the town employees will have the same rights and benefits as those in the town, state and country. It is the only fair, equitable and ethical way to treat the issue.
Charles Baltayan May 16, 2012 at 07:22 PM
Mr. Alegi- The Retirement Plan is very complex and muchmore complex than you noted. Here is the link but you may have to enter retirement plan into the search bar: http://www.amlegal.com/nxt/gateway.dll/Connecticut/hamden_ct/townofhamdenconnecticutcodeofordinances?f=templates$fn=default.htm$3.0$vid=amlegal:hamden_ct
Thomas Alegi May 16, 2012 at 11:50 PM
Thanks Charles
Thomas Alegi May 16, 2012 at 11:59 PM
The site you referred me to shows the 1983 town charter as Hamden’s charter, which is no more, is the rest of the information on the site up to date.
Ron Gambardella May 17, 2012 at 12:13 AM
Here is my thinking. Town employees who have not had a chance to build up social security quarters to collect a full benefit have no recourse, the only option available to them is the town pension plan that they were counting on. Those who have worked in good faith deserve equitable treatment. The right thing to do is to provide security as they approach retirement age. I suggested a 10 year cutoff, however, the actuaries would be in a better position to determine the actual cut-off age. Additionally, in order to qualify for full benefits, the retirement age will also have to be extended before benefits are payable. To collect a full social security benefit a worker must be able to show that they worked 40 quarters. Town employees who plan to work up until retirement age may not have enough time to build up enough social security credits to retire with a nest egg. My plan moves us toward a fair and balanced solution. Clearly what we have now cannot be sustained. Incidentally, moving new hires to a state plan doesn't come close to solving the problem.
Sandy May 17, 2012 at 01:25 AM
I don't think changing the system for employees with under 10 years of service wil address the issues- too few of them. I agree with changing the retirement age eligibility and imposing a reduction if employees retire early. I think the town has instituted a 401K plan for new hires, hasn't it? As far as leadership, I think that hiring experts when the town doesn't have the technical expertise to make the right decision for the long term solution we all want shows good leadership. Even Mr. Gambardella defers to the actuarials. It seems the mayor and town council want to do it right.
AG May 17, 2012 at 01:53 AM
Great link Charles...here is another for anyone interested in how Hamden compares in relation to other towns in a variety of measurements. Note that Hamden has an Actuarial Accured Liability (AAL) of over $300M with one the lowest percent of AAL funded. You can also see in this public report that Hamden already has the second lowest bond rating in CT and provides more hard stats than the pension study we just paid $80,000 for.
AG May 17, 2012 at 01:54 AM
Sorry,here is the link: http://www.ct.gov/opm/lib/opm/igp/munfinsr/fi2006-2010_12-9-11_v2.pdf
Charles Baltayan May 17, 2012 at 03:21 AM
The employees have contributed to the plan, as has the town. The plan members have the same benefits as those 'in the real world' and like us, are subject to the same economic vagaries. Thankfully they have not been subject to the likes of Enron or been lied to about the amount of money in their brokerage accounts. When they were employed by the town they received the information on the plan and willfully accepted it. The plan states the town has no liability to the plan. The members have clear rights to the funds in the plan and can opt out anytime. The members all knew that the town was not funding the plan. We need to do what is right for the plan member/employee and dissolve the plan ASAP, yielding the member the most money to invest as they see fit to retire and then they can supplement with social security as able or desired. The plan member gets what is due, the taxpayer is not left with an unreasonable burden and hopefully the administration learns to act in a fiscally responsible manner in thefuture.
AG May 17, 2012 at 03:56 AM
Charles, my read is a bit different. The $300M AAL is a clear legal obligation and we cannot wish it away. I'm afraid eventually the taxpayer will be left holding the bag in one form or another. You say "The members have clear rights to the funds in the plan and can opt out anytime." Title 1 (General Provisions) Sec.31.32 (Participation) says in part -*All eligible employees shall participate in the plan as a condition of employment with the town, and shall make any mandatory employee contributions so required for non-bargaining unit employees or by the applicable collective bargaining agreement.* I see no provision for opting out, What are you referring to?
George Levinson May 17, 2012 at 06:19 AM
Thomas, Most private sector companies have a formula very similar to Hamden's. The issue is not how long or when you have earned it. The issue is how old do you have to be to start collecting. In Hamden you can collect immediately upon earning it. That means many police or fire can collect in their early forties and there is no reduction. In addition, public sector workers get guaranteed COLA. In the private sector the reduction for early collection is typically around 6% for every year early. At this point almost nobody in the private sector gets a defined benefit pension at all. And, by the way, almost nobody has ever gotten COLA at all. How much more do you need to realize that the town workers have been given an extraordinary sweet deal? There are no acceptable solutions other than big concessions or dissolving the plan altogether.
Ron Gambardella May 17, 2012 at 12:58 PM
Actuarial assessments determine what funding levels are required to support whatever plan the administration enacts. They do not write policy or decide what plan is best for the town. They do, however, provide helpful insights relative to the overall funding levels. The current actuarial projections always assume the existing plan stays as is. Once the plan is changed, the unfunded liability will also change. For example, folks who have ten years of service or less will be removed from the unfunded liability equation or at least the portion of the funding that they have not earned under the old rules. With the increase in retirement age and the termination of the existing plan, the unfunded liability should decrease substantially saving millions of dollars. The actuaries can then revise their projection based on the new rules. With 23 years of Democrats at the helm, this, so far, has not been addressed. That may change, but it took a crises to get us there. That is not leadership!


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