Ohio Firefighters, Police Officers Angry Over Retirement Cuts

A decision to cut the interest rate that thousands of Ohio police officers and firefighters earn on their retirement accounts isn’t sitting well with some, despite contentions that the payout is too expensive.

Starting this month, the Ohio Police and Fire Pension Fund is paying 2.23 percent interest on accounts in the Deferred Retirement Option Plan, or DROP. The system had been paying 5 percent since 2003, when the optional statewide program began.

It lets police officers and firefighters defer retirement up to eight years while their pension payments accumulate with interest. They can get the lump sum upon retiring.

The pension they receive in retirement is frozen at the time of enrolling in DROP and is unaffected by later pay raises. The program has generated controversy across the state because retirees on occasion walk away with checks of several hundred thousands of dollars.

“Senate Bill 5 (the 2011 attempt to slash public employee collective bargaining) was an assault on policy. This really is an assault on your money right now,” Kevin Reardon, a battalion chief with the Columbus Division of Fire, said of the interest-rate change. “This is your family’s security that’s being attacked right now.”

Leaders of the pension fund disagree.

“You can’t pay out more than what you earn. We’re not the federal government. We can’t print money,” said Executive Director William Estabrook. “Our earned interest in 2011 was 2.24 percent.”

The fight so far is between firefighters and the pension system. (Police, notably, are OK with the change.)

But the conflict has the potential to spill into the Statehouse, where Senate Republicans expect to act before the summer break on proposed legislation to address the long-term solvency of the safety-forces retirement account and four other state pension plans. The plans must show that all pension obligations can be paid within a 30-year period.

Senate President Tom Niehaus has said he wants the pension systems to prove that their members support the changes.

Though the interest-rate drop didn’t need legislative approval, other police and fire pension proposals do. They include a higher retirement age (from 48 to 52) for new hires, bigger deductions from employee salaries (from 10 percent to 12.25 percent) and lower cost-of-living adjustments.

Jack Reall, president of the Columbus firefighters union, said he wrote a letter to the pension fund board in March opposing various proposals. Reardon and others in the union, who protested the interest-rate decrease at a recent board meeting, said current participants in DROP should be exempted.

“A lot of these problems can really go away if they grandfather everyone already in,” he said, adding that when the plan was first offered years ago, “it was sold to us at 5 percent.”

Estabrook pointed out that the change has been on the table for more than a year and the pension fund board’s vote was unanimous. Two board members, one representing active firefighters and another representing retired firefighters, agreed to lower the interest rate.

He said the board can adjust the interest rate — which will change quarterly to match the 10-year U.S. Treasury note rate in effect on the last day of the previous quarter — in the future if investment returns bounce back.

Estabrook said he isn’t worried that blowback on the interest rate will affect the fate of the broader pension legislation. Republicans, who faced heavy criticism from public workers during the Senate Bill 5 fight last year, don’t want a repeat performance this year over pensions.

“You’re going to have mavericks out there against any change no matter what. I don’t think there’s going to be any purposeful pushback,” Estabrook said. “I think the membership understands that. This is for the long haul. It’s not short-term stuff. This is for their brothers and sisters down the road, not just today.”

The Fraternal Order of Police of Ohio didn’t oppose lowering the interest rate.

Michael Weinmann, the FOP of Ohio’s director of government affairs, said the union is more concerned about helping move the pension legislation forward because it affects more members than DROP does.

About 3,500 police and firefighters participate in the DROP program, according to the pension fund, which couldn’t provide an estimate of how much the interest-rate drop would affect retirement accounts. The biggest factors in the size of an account are the pension amounts going in and how many years someone participates.

“Raising the retirement age, raising the (employee) contribution rate — these things are painful,” Weinmann said. “These things are sacrifices we have to make, but it’s to keep these systems healthy.”