Omaha and Lincoln witnesses protests from advocacy groups and police and firefighter city unions
The firefighters and police unions in Omaha and Lincoln, the two largest cities in Nebraska took to the streets on Tuesday to protest the planned implementation of a bill which if passed proposes to overhaul the traditional pension plan and replace it with a cash-balance retirement plan. Although firefighters and police personnel in the two cities criticized the bill en masse, it drew support and appreciation from the conservative groups who saw it as a way to keep the pension plan solvent and effective without becoming a huge burden on the exchequer.
A cash-balance pension plan, like a traditional pension plan, is a defined-benefit plan because the employer credits a set percentage of the employee’s yearly compensation to an individual account maintained in the name of the employee along with an interest payment. Since the benefits are fixed, any interest gain or loss on the portfolio must be borne by the employer alone. However, there are allegations that despite being a definite-benefit plan, because it is maintained on an individual account basis, the returns are usually less. It is also similar to the defined-contributions plan under which a company sets aside a portion of its total expenditure which it credits to an account which will provide post-retirement benefits to an employee.
The measure which is still pending before a legislative committee of Nebraska plans to introduce a cash-balance pension plan instead of a traditional pension plan for new recruits in the police and fire department in the two cities.
Despite the fact that a cash-balance retirement plan, unlike a traditional pension, is portable and has features akin to 401 (k) which make it an attractive proposition, the protestors believe that it will crimp the overall return that an employee would otherwise receive post superannuation.
What the proposer of the bill has to say?
The bill has been introduced by Senator Mark Kolterman of Seward. He says that his aim is to keep the pension plans in the two cities sustainable and also solvent. He has argues that the proposed bill won’t rob the employees of their retirement benefits as they would it is a defined-benefit plan. They can claim the amount as an annuity or a lump sum.
He has also tried to allay fears by assuring that the current plan members would continue to receive what they have been promised. The changes are being proposed for new recruits only.
The spokesperson for the two unions appeared far from assured as they felt that it would jeopardize the recruitment drive to induct new talent into the severely depleted police and firefighter’s forces. People would either not join the forces or those who get a chance to move would shift to other cities or states with better benefits, which according to them could have a “devastating impact on public safety..”.
The officers also pointed out that San Jose, California has lost close to 650 police officers in the last six years after the introduction of the cash-balance retirement plan and they fear that a similar fate may befall those in Omaha and Lincoln.