The Owensboro City Commission approved a 1.6% cost-of-living increase for former employees enrolled in the city's closed pension plans at a regular meeting on Tuesday.
The annual increase is determined by the annual percentage rate set by the Social Security Office. In this instance, however, the increase only applies to those Owensboro city, fire and police employees who opted to stay with the city plans before employees were moved into Kentucky Retirement Systems' County Employee Retirement System in the 1980s, said Angela Hamric, Owensboro finance and support services director.
"Back in the '80s, we had two plans," she said. "One was the police and firefighters' retirement plan, and the other was a city employee pension fund. When the CERS was introduced in the early '80s, members of each plan had the option to remain with the city plan or transfer to the state system. The folks that were voted on (Tuesday) are those that chose to remain in the city plan."
Those retired members of the city police and fire departments could opt to remain in the city plan until Aug. 1, 1988. After that date, all fire and police department employees were required to be a part of CERS. Currently, there are 36 people drawing from that fund, 21 of whom are widows.
Members of the city employee pension fund, including past employees of Owensboro Municipal Utilities, could choose to remain on the city plan until Oct. 6, 1986. Currently, there are 19 members still benefiting from the fund, 14 of whom are widows, Hamric said.
"These individuals range from, on average, their mid-60s to their mid-70s," she said. "Many of these people or their spouses retired in the 1980s. There is also a rate, for those employees considered "minimums," meaning that they didn't have a lot of time in the pension, whose rates cannot be lower than the Social Security rate set each year. For example, if Social Security sets their cost-of-living increase to 3%, then those considered "minimums" would be guaranteed no less than that 3%"
The city employee pension fund has no impact on the city's budget, but the police and fire pension fund comes out of the general fund, she said.
"The city employees made their contributions," she said. "That money was well invested, and there has been a great return on those funds so that fund continues to support itself. The fire and police is funded through our general fund. When those members no longer draw from the police and fire fund, those funds will no longer come out of the city's budget. When past city employees on the city plan no longer draw, then OMU and the city will have a lot of work to do to determine how many members involved in each organization contributed, how much, etc. There will be a lot of work in making that determination.
"Hopefully, it is something we won't have to think about for a long time."
Jacob Mulliken, 270-228-2837, email@example.com