Part One of this 3-part series is HERE.
Part Two can be read HERE.

Crossing the Finish Line

A view on policy where firefighter disability pensions are concerned:

The goal of management and labor is to create a work environment where all but the most severely incapacitated members can achieve a normal retirement pension.

This is a wholesale departure from the current environment. Many pension systems now allow and even encourage the retirement of a member for any reason, however slight, which prevents them from engaging in fire/rescue operations. In addition, in most cases the disability pension that is awarded is the same for everyone. A firefighter with a mild disability, one alleviated with treatment or rehab, receives the same rate of pay as a firefighter who fell forty feet and is quadriplegic. So, in many places it’s a one size fits all that not only encourages disability retirement but can create a culture where the expectation is that most members will retire on disability. There is little, if any, incentive to strive for a normal retirement benefit.

There could be an entirely different expectation created by labor and management: through a combination of flexibility, creativity and job re-training many “disabled” members could be accommodated, even if they were no longer to perform field duty, so that they could be productively employed until they reach normal retirement eligibility. The key is that it requires flexibility and creativity to rescue a pension system where 25% or more of the retiring members are disability recipients who can perform many other professional responsibilities or are likely to leave the service and start a second career. Many folks with these mild “disabilities” take the tax-free pension and immediately go back to work. Is that really the intent of disability coverage? It has been reduced to a “get-out-of-jail-free” card.

One issue that frequently crops up where firefighter pension reform is concerned is that in order for reform to occur the parties mentioned earlier have to align around a common goal. For example, fire chiefs have little or no interest in reform since the cost of pensions is not included in their budget and some of them even take advantage of the current system. In fact, some of the costs of reform, such as alternative placement of a re-trained fire fighter, may even “cost” the fire department money. Risk Management and Human Resources professionals have to be willing to adopt new rules, including alternative placement strategies, to allow for change. Unions and associations may be overly invested in the current benefit structure (though it clearly harms some of their members) and they may lack the fortitude to initiate real change. Anyone looking at just a “piece of the pie” may not be happy with the idea of reform. Three groups of people would be: severely disabled retirees who can use more help, normal retirees who see their benefits being destroyed and the taxpayers who pay for the system.

The rehabilitation approach that allows for an injured member to make it to a full normal retirement will probably require that the current disability benefit be split into (at least) two benefits: one for mild disabilities where it is very likely that the person can and will seek employment once they retire and an even greater benefit for members who are severely disabled, a “super benefit” of 90% or more of their pay, tax-free. This provides the first half of an incentive package for people to work through disabilities and stay on the job, recognizing that if they leave they will receive a smaller benefit for a less severe disability. Of course, people who are going to stay and work through a disability or possibly be re-trained need expert and top-quality medical and rehabilitative care, not the doc-in-the-box approach favored by some clueless administrators.

Fire chiefs (and union officials) have to view their members in light of the new contract: absent a severe disability, members will be re-trained to perform necessary tasks within the organization. Human Resources must be willing to create and fund a limited number of alternative placement positions to accommodate these members, recognizing that the overall cost is still less than the wholesale retirement of so many firefighters on disability.

It is actuarially possible to determine potential cost savings for a variety of scenarios where disability rates decrease and normal retirements increase as members are rehabbed and remain in employment. A portion of this forecast savings should be immediately applied as an enhanced benefit for normal retirees. You cannot reduce the disability benefits without applying a portion of that reduction (in the form of anticipated future savings) to normal benefits.

The ultimate goal is to:

1. Reward members who strive to reach normal retirement.

2. Provide excellent rehab and re-training services together with alternative job placement.

3. Provide an enhanced tax-free benefit (90 %+) to those with severe disabilities.

4. Reduce the standard disability benefit for those with moderate or mild disabilities who decline alternative placement.

The long-term objective is to encourage everyone but the most severely disabled to work toward normal retirement. It’s a drastic change but one that is sorely overdue in some fire departments where the work culture concerning disability retirement actually harms workers who either make it to the finish line or fall short due to a severe injury or work-related illness. Reform ultimately requires the consent of elected officials but if leaders representing both labor and management come forward with a plan, success is all but assured.

Now we just need the leaders.

Part One of this 3-part series  is HERE.

The Cooks In The Kitchen

It takes a lot of cooks to make a stew this unsavory. Some key players:

Pension Board Staff- Pension systems of any size will have a dedicated staff to manage operations, support the elected pension board and help plan members, both active and retired. While they generally should stick to implementing policy they obviously are extremely powerful in other areas as they know more about the day-to-day affairs than anyone else. Often they are hired by the same elected municipal officials who are responsible for the solvency of the fund. This may make them more inclined to see the management side versus the employee’s. In addition, they often oversee more than one pension fund (police, teachers, etc.) and thus may push for uniformity in benefits and other areas.

Elected Pension Board- Often comprised of a mix of elected employee representatives, management representatives and citizens. They make decisions or recommendations on investment choices and strategies, overall benefit levels and awards in specific cases. They are quite often bound by negotiated contracts, worker’s compensation statutes and other laws related to injured workers. Many of these individuals can have competing and conflicting loyalties that should be mitigated, but is often not, by their fiduciary responsibility to the fund they govern. To wit: occasional stories of elected members accused of various self-dealing schemes where they attempt to enrich themselves at the expense of others or engage in dubious travel and other activities.

Risk Management and Human Resources- These are management functions designed to control costs associated with injured workers and to either oversee a merit system for employees or to give the impression that one actually exists.

Attorneys- Everyone has them and that’s not necessarily a bad thing but it is a complicating factor as they are paid to represent the best interests of their clients and there are a lot of clients here. Generally speaking they favor the status quo and are likely to be a burden where reform is concerned.

Fire Chiefs/Commissioners/CEOs- Well, you know who these guys are but you may not know that they wield significant power over how individual “disabled” employees are handled. In many departments the “fair haired” are accommodated to a startling degree where others, sometimes deemed as less valuable or just a pain in the ass are given zero flexibility in terms of their choices.

Municipal Elected Officials- They are often ultimately responsible for the fiscal soundness of the fund and may be required to make up actuarial or investment losses by upping the employee portion or making direct transfer payments from the general fund. They can make decisions affecting retirements based on purely political motives that may be bad for plan participants. Since many of the decisions made by politicians around pension benefits only manifest their effects in out-years they require particular scrutiny because others may be left holding the bag, which very well may be empty.

Unions and Associations- In theory they represent the best interests of all their members but remember that they are elected officials too and may find it very difficult to make tough decisions especially if they want to be re-elected. They may not be particularly interested in reform especially if it involves lowering benefits in one area to balance them in another. There is little doubt that the current disability pension mess was created and fostered by both labor and management. The trick will be to see if there are any leaders in the house to get us out of it.

Plan Members- That’s you and me. We come in all stripes and colors from folks who simply want a decent, normal pension after a full career to legitimately disabled workers who deserve to be well taken care of, to others who may be classified as disabled because of poor policy, inertia and a lack of flexibility to a final group who are just out to scam the system.

Tomorrow: Ideas for Reform