Key Biscayne leaders are looking to better manage their budget by setting a limit to how much the village contributes to police pension plans.
The Key Biscayne Village Council unanimously approved new three-year contracts with the village’s police unions at the Aug. 26 council meeting. As part of the deal, the council will approve a village law Sept. 23 that will set a cap on how much money the village contributes to police pension plans each year and limit the debt that mounts from these plans.
The village is required to contribute a certain amount of money to the retirement funds of police and firefighters each year. This law will cap the village’s contribution at 14 percent of covered payroll, the total amount of money made by police officers contributing to their pension plans. Police contribute 10.5 percent of their salaries to their retirement plan. There was no set limit to the village’s contribution to pension plans prior to this law.
“We tried to establish a system that will enable us to have more control over our budgets and still honor our funding responsibility without radically changing benefits for employees,” Mayor Frank Caplan said.
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The village law will also limit the unfunded liability for police retirement plans to about $1.7 million. Unfunded liability is the amount of pension money the village would be unable to pay if the bill came due today.
The new union contract also limits pension payments to future retirees to $90,000 or 90- percent of working pay, whichever is less. The deal also reduces the amount of pension benefit officers will accumulate each year from 3 percent to 2.75 percent of their salary. This amount is multiplied by the number of years of service to determine the officer’s retirement benefit. For example, a new officer who retires in 20 years would get 55 percent of working salary.
The new contract also provides officers with a 2.8 percent cost-of-living raise.
The 29 police officers covered by the contract ratified the deal.
The village settled its firefighters’ bargaining agreements in March. The terms of the pension agreements for firefighters and police are similar.
“We were interested in achieving uniformity in collective bargaining agreements,” Mayor Caplan said. “We tried to create better equivalency in pension benefits.”
Firefighters also contribute 10.5 percent of their salaries to their retirement plans, and the village capped its contribution to firefighter pensions at 14 percent of payroll. The unfunded liability for firefighters is approximately $3 million.
It is not yet known how much money the village will save by setting these limits. Vivian Parks, director of finance and administrative services in Key Biscayne, said the contribution cap was set at 14.98 percent prior to pension negotiations. The village’s current financial reports do not reflect the change from 14.98 percent to 14 percent. Until that report is drawn, there is no way to know how much money the village will save.