Rules on firefighters’ pension fund are likely to change

At last week’s meeting of City Council’s Audit and Finance Committee, chair Alison Alter thanked city staff for their work over the past several years to ensure a sound pension system for all three sets of city retirees – police, civilians and firefighters.

“It is really, really important that we make sure we are planning for the pensions for people who have served our community,” she said. “We have a fiduciary and a moral responsibility to make sure our systems are sound.”

Although the city has made changes to the pension plans for Austin police officers, as well as for the city’s civilian employees, changes are still needed for the Austin Firefighters Retirement Fund in order to maintain funding promised to retirees. According to an audit report from the actuarial firm Athena, the projected amortization period for the firefighters’ fund is currently 35.7 years. That is the length of time it would take to pay back the principal plus interest on a loan. The Texas Pension Review Board recommends less than 30 years.

According to the 2022 actuarial valuation report, “the ‘tread water’ Contribution Rate is not being met by the current fixed contribution rates. This means that contributions are not sufficient to cover the amount of the annual benefit accruals plus interest on the Unfunded Actuarial Liability (‘UAL’), which generally results in an expected increase in UAL moving forward.

“Furthermore, if assumptions are met, unless the Plan experiences a significant gain, it is anticipated that a Funding Soundness Restoration Plan (‘FSRP’) will be triggered with the 2024 valuation. As such, AFRF may wish to consider revising the contribution and/or benefit structure in order to increase the long-term projected funded status of the Plan to a more favorable level.”

Alter called on city Chief Financial Officer Ed Van Eenoo to explain what might be happening with the firefighters’ pension fund.

Van Eenoo told the committee his office has had “several very productive conversations” with the fire retirement system and “we will continue to have meetings leading up to the 89th Legislature,” he said. The goal would be to have a bill filed on Jan. 1, 2025. That legislation would make changes to the firefighters’ retirement system similar to the changes for civilian employees and police officers, he said.

City employees who joined the workforce prior to Jan. 1, 2012, are in what is called Group A. Those who joined after that date are in Group B. Group A members are eligible to retire at age 55 with 20 years of service or at any age with 23 years of service. Group B members may not retire until they are at least age 62 with 30 years of service or at age 65 with at least five years of service. Firefighters who join the city in the future are likely to see similar changes to their retirement plans.

The report provided to the committee included a discussion of the cost-of-living adjustments provided to firefighter retirees over the past 10 years. According to the report, such adjustments were provided 80 percent of the time to eligible members. However, there was no such adjustment for 2023 and one is not likely in 2024. Unless financial conditions change for the better, those adjustments seem unlikely in the near future.

One factor causing a reduction in money collected by all three pension funds, as compared to money being paid out, is that more people are retiring than are joining the ranks of civilian and sworn employees. That problem is not one that is easily solved and may mean that cost-of-living adjustments are going to be few and far between into the future.

Photo made available through a Creative Commons license.

The Austin Monitor’s work is made possible by donations from the community. Though our reporting covers donors from time to time, we are careful to keep business and editorial efforts separate while maintaining transparency. A complete list of donors is available here, and our code of ethics is explained here.