Portsmouth council yet to act on pension promise

PORTSMOUTH

An expensive commitment to right what many municipal retirees consider a decades-old wrong has vanished from the city's to-do list.

City Council members who voted last year to tackle the pension-reduction issue for 440 people said last week they have not given up on the measure. The budget that began July 1 contains no money for it, however, and some council members are still waiting on a plan from City Manager Kenneth Chandler on how to fund it.

Councilman Steve Heretick said the matter was "really an impossible conversation" to have this budget year, which included a real estate tax rate hike to cover increasing costs.

A group of retirees following the issue has grown to about 50 members, many of whom attended council meetings last winter to keep their request in the public eye. They don't plan to let the issue die.

"We can't. It means too much to a lot of people," said Bob Brown, a retired 33-year social services worker.

At issue is a provision in the city's old retirement system for general wage employees that reduces pensions when members reach 65 and begin collecting Social Security. Any cost-of-living increases members had received since retirement also are wiped out.

Together, the changes can reduce a retiree's city pension by half or more, not counting their new Social Security payments.

The Portsmouth retirees have consistently said they were not fully informed about the Social Security offset when they had a chance in the 1980s to leave the plan. Brown said he recalls being told that if he thought he'd spend the rest of his career in Portsmouth, his best bet was to stay in the city system.

"Who in their right mind would go with a pension plan that's going to reduce at the age of 65 when my Social Security kicks in?" he asked. "Why would we penalize ourselves?"

Shirley Robinson, 66, spent 30 years with the city as a social services eligibility worker. She said she was already relying on savings when her city pension was reduced. She said she now gets help from family to pay her bills.

"It's like I'm not receiving the Social Security at all," she said.

According to a list from the city, as of Jan. 1, about 400 retired workers were drawing pensions from the city system. Of those retirees, 263 were receiving gross payments of less than $2,000 each per month, and 129 were receiving less than $1,000 each per month, according to the city record. The list did not specify which retirees had turned 65.

The city closed its retirement system to new employees in 1984 and moved new workers to the state-run Virginia Retirement System.

Employees at the time were allowed to choose to stay in the city system or move to VRS. Each had their perks. Other cities and government agencies also were in VRS, allowing workers to transfer their accrued benefits across multiple employers.

Members in the Portsmouth system accrued benefits at a slightly faster rate, and in the 1990s a $200 health insurance supplement was added to their monthly payments until age 65.

VRS does not reduce payments or take away cost-of-living increases when retirees start collecting Social Security, however.

A 1984 article in Currents, a community news section for Portsmouth readers of The Pilot, about the employees' decision said the city's actuarial firm had given each worker a sheet comparing their benefits under both systems. A 1977 city handbook on the Portsmouth retirement system also includes a section that says the benefit calculation takes Social Security into account.

Jim Finnegan, another retired social services employee, said he and other retirees' recollections are murky over what exactly was said about the differences in benefits, but they are sure the impact of the offset was never clearly explained.

David Norman, a retired 27-year director of Behavioral Healthcare Services, said he remembers hearing that the only benefit to switching to the state system was its portability.

A council-appointed committee of financial and business leaders studied the issue and concluded that the Social Security offset reduced some benefits to below the poverty level. They recommended that the provision be removed, at a cost of about $1.9 million a year over the 25-year life of the plan.

The City Council tried to help on a smaller scale in April 2010. They voted to distribute one-time checks for $1,083 to 81 retirees whose city benefits fell below the poverty line.

In May 2010, the council voted 7-0 to direct the city manager to devise a plan to pay for the elimination of the offset in three years. A study last fall reported that it would cost $6.5 million a year to pay for the change in that shorter time frame.

Chandler was directed to have a plan ready for adoption in the current budget, but council members never discussed the matter at any length this spring. Councilman Curtis E. Edmonds Sr. suggested putting a portion of a prior year's surplus toward the expense, but the idea was never pursued.

Mayor Kenny Wright said the issue needs to be addressed, but that it's not a top priority.

He said his bigger concern is the long-term solvency of the retirement system, along with a second, much larger pension the city has for public safety employees. Both systems were funded below 40 percent as of July 1, 2010. Systems funded at 80 percent typically are viewed as healthy.

The retirees worry the offset issue will get lost in the larger discussion on the health of the pension systems. To some, it's not just a question of fairness but a matter of making ends meet in their golden years.

"This is one of life's biggest decisions, and this atom bomb gets dropped," Finnegan said.

Dave Forster, (757) 446-2627, dave.forster@pilotonline.com