Borough, Firefighters Reach New Agreement – 12/27/2012

Posted by Bob on December 27, 2012 under Daily Blogs | 4 Comments to Read

The Board of Mayor and Burgesses (“BMB”) voted six (6) yea to zero (0) nay to authorize execution of a new collective bargaining agreement (“CBA”) between the Borough and the Naugatuck Firefighters collective bargaining unit (“CBU”), International Association of Fire Fighters (“IAFF”), American Federation of Labor – Congress of Industrial Organiations (“AFL-CIO”), Local 1219, at a special meeting held on Thursday, December 27, 2012.  The agreement, which covers the period from July 1, 2012 (retroactively) through June 30, 2015, can be viewed here.  A summary of the fiscal analysis of the CBA prepared by Borough Comptroller Wayne McAllister can be viewed here in both Microsoft Excel and .pdf format.  Said fiscal analysis does not include the savings to the Borough which will be accrued over many years as a result of the increase in premium cost share for health care plans, transition to defined contribution pension plans for new hires and the changes to retiree health care benefits as discussed below.  Additional information regarding the changes to health care plan design was distributed as documents at the meeting, and will be posted electronically upon receipt of the same.

The CBA includes changes to the Borough’s pension system by requiring all new members of the CBU to be members of the Borough’s defined contribution pension plan.  The change to the Firefighters CBU regarding defined contribution pension plans for all new hires completes the transition to this structure for all of the Borough’s seven (7) municipal bargaining units, which began in 2009.  The new CBA also includes changes in contributions to existing employee health benefits similar to the agreements reached in 2011 and 2012 with the police, clerical and visiting nurses bargaining units; in addition to a significant restructuring of retiree health insurance.  A summary of the CBA is as follows:

Health Care:

The Borough achieved significant cost savings as a result of changes to health benefit packages offered to the members of the CBU.  Two choices are offered to members:  the traditional preferred provider organization or “PPO”; and the high deductible health plan or “HDHP”, which for the plan offered is a health savings account or “HSA”.  Many members of the CBU have already switched to the HSA through previous negotiations.

PPO

Beginning on January 1, 2013, the premium cost share for members in enrolled in the PPO plan will increase from eight (8%) percent to nine (9%) percent.  Premium cost shares for members will increase to ten (10%) percent and eleven and 50/100ths (11.5%) percent respectively on July 1, 2013; and July 1, 2014.

HDHP or HSA

The Borough and the Police CBU agreed to changes to the existing HSA plan that will result in savings.  Beginning January 1, 2013, members will pay a premium cost share of two (2%) percent toward their HSA.  Premium cost shares for members will increase to four (4%) percent and six (6%) percent respectively January 1, 2014; and January 1, 2015.    Effective January 1, 2013, the HSA deductible will shift to a TWO THOUSAND and 00/100THS ($2,000.00) DOLLAR / FOUR THOUSAND and 00/100THS ($4,000.00) DOLLAR plan.

More importantly, members enrolled in the HSA will gradually increase the deductible paid toward their respective plan in the following manner over the life of the agreement (plans are managed on the basis of calendar years rather than fiscal years):

  • Beginning January 1, 2013: members will increase their portion of the deductible from twenty five (25%) percent to thirty (30%);
  • Beginning January 1, 2014: members will increase their portion of the deductible to thirty five (35%) percent; and
  • Beginning January 1, 2015: members will increase their portion of the deductible to fifty (50%) percent.

The changes to the health benefits contained in the CBA represent significant savings to the Borough over the three (3) year period.  Said savings are estimated to total between THREE THOUSAND and 00 /100THS ($3,000.00) DOLLARS and FOUR THOUSAND and 00/100THS ($4,000.00) DOLLARS annually over the life of the CBA, but do not include the significantly greater savings that will be achieved over the life of the contract as a result of a reduction in rates based on the cost-sharing and plan design changes.  Our Finance Department will work with our insurance broker and carrier in an attempt to quantify such savings in a conservative manner over the life of the agreement.  The same will be posted when available.

Retiree Health Care

Prior to this CBA, firefighters retiring from the Borough received health care in retirement by paying the percentage of the PPO premium cost share then in existence by contract at the time of the individual firefighter’s retirement.  The new CBA makes significant changes to the cost share structure.  Any member of the CBU who retirees by June 30, 2017 (within the next five years) shall receive retiree health benefits without cost to the former employee, which is an increased benefit to members of the CBU from the current practice.  After this five (5) year period, retirees will contribute the following percentages of their health care cost on a graduated scale as follows:

  • Retiring more than five (5) years, but (10) years or less after June 30, 2012:  FIVE (5%) PERCENT
  • Retiring more than ten (10) years, but fifteen (15) years or less after June 30, 2012: TEN (10%) PERCENT
  • Retiring more than fifteen (15) years, but twenty (20) years or less after June 30, 2012:   FIFTEEN (15%) PERCENT
  • Retiring more than twenty (20) years, but twenty one (21) years or less after June 30, 2012:  SIXTEEN (16%) PERCENT
  • Retiring more than twenty one (21) years, but twenty (22) years or less after June 30, 2012:   SEVENTEEN (17%) PERCENT
  • Retiring more than twenty (22) years, but twenty three (23) years or less after June 30, 2012:   EIGHTEEN (18%) PERCENT
  • Retiring more than twenty three (23) years, but twenty four (24) years or less after June 30, 2012:   NINETEEN (19%) PERCENT
  • Retiring more than twenty four (24) years, but twenty five (25) years or less after June 30, 2012:   TWENTY (20%) PERCENT
  • Retiring more than twenty five (25) years after June 30, 2012:   TWENTY FIVE (25%) PERCENT

Most significantly, all employees hired after July 1, 2012, shall pay FIFTY (50%) PERCENT of their health benefits upon retirement.

Pensions

Significant changes were made to the pension plan offered to members of the Firefighters CBU.  A summary of those changes are as follows:

  • All new employees to the Firefighters CBU hired on or after July 1, 2012, will be eligible for the Borough’s defined contribution pension plan only.  The Borough shall contribute a maximum of three and 75/100ths (3.75%) percent of the employee’s gross pay (wages, plus percentage of capped overtime, unused sick and vacation time less private duty) to the plan.
  • Current employees shall double their existing contribution in the defined benefit pension plan from four (4%) percent to six (6%) percent beginning on July 1, 2013; and increase that percentage to eight (8%) percent beginning on July 1, 2014.
  • No further changes will be made to the defined benefit plan for existing employees through July 1, 2051.
  • No further changes can be made to the policy of new hires joining the defined contribution pension plan but for discussions by the parties regarding the employer percentage contribution.
  • The calculation for defined benefit pensions for existing employees shall be changed from the “last three (3) years” to the “best three (3) calendar years”, and allow existing members of the defined benefit plan to include (i) a dollar figures up to the amount of sixty (60%) percent of overtime total earned (an increase from 33%) in the employee’s last year of employment toward the employee’s pension calculation; and (ii) include up to sixty (60) days of unused sick time (an increase from 30) in the employees pension calculation.
  • Employees in the defined benefit plan currently can retire and earn a pension of seventy five (75%) percent of gross pay (wages, plus percentage of capped overtime, unused sick and vacation time less private duty) after twenty five (25) years of service.  This requirement remains the same under the changes but for the increase in percentage of capped overtime (33% to 60%) and allowable, unused sick days (30 to 60).
  • Employees in the defined benefit plan could previously retire between twenty (20) years and twenty four (24) years of service at the following respective percentages of gross pay:  Twenty (20) years – sixty (60%) percent; twenty one (21) years – sixty two (62%) percent; twenty two (22) years – sixty four (64%) percent; twenty three (23) years – sixty six (66%) percent; and twenty four (24) years – sixty eight (68%) percent.  UNDER THE CHANGES, current employees in the defined benefit plan can retire between twenty (20) and twenty four (24) years of service at the following respective percentages of W-2 wages:  twenty (20) years – seventy (70%) percent; twenty one (21) years – seventy one (71%) percent; twenty two (22) years – seventy two (72%) percent; twenty three (23) years – seventy three (73%) percent; and twenty four (24) years – seventy four (74%) percent.

An actuarial projection provides the costs and calculations associated with the pension changes, and can be viewed here.  Said actuarial projections projections were based on more conservative estimates than the actual changes approved (higher calculated percentage of capped overtime and 90 sick days allowable rather than 60).  The study has been commonly referred to as a “bend” projection, showing when the changes to the pension plan will eventually reduce costs to the Borough.  While the projection attached states that costs saved will outpace costs incurred by 2025, Finance expects that is likely to occur three (3) years sooner based on the conservative estimates used to calculate the changes.  Once an updated projection is complete, it will be posted.  Costs associated with the early retirement incentives will depend on which firefighters elect to retire under the incentives.

The most significant part and primary reason for these changes is the switch to defined contribution pensions for all new hires in the bargaining unit.  A defined contribution pension is similar to a 401 (k) plan commonly offered in the private sector.  The cost savings in future years will be significant.  While there will be initial costs associated with the increase of of percentage of capped overtime and unused sick days which existing members will be allowed to use for calculating retirement, the change will yield long-term fiscal stability for Borough taxpayers and a more sustainable government in terms of benefits paid to future employees.

The Firefighters CBU will now become the seventh (7) and last of Naugatuck’s seven (7) municipal bargaining units to move to defined contribution pension plans for new hires since 2009.  Traditional defined benefit plans, which represent a significant cost to Naugatuck’s budget, will no longer be offered to Borough employees in any municipal department.  While it may take more years than we would like to see real savings from these changes, the long-term fiscal health of the Borough will be significantly improved by the switch to defined contribution pension plans.

Wages:

Members of the CBU will received increases in general wages for the following years at the following rates:

  • 2012-2013:  Two and 00/100ths (2.05%) percent;
  • 2013-2014:  Two and 50/100ths (2.50%) percent; and
  • 2014-2015:  Two and 20/100ths (3.00%) percent.

The wages of the Firefighters CBU were slightly higher than those reached with clerical employees and visiting nurses (2.10%/2.15%/2.20%) to compensate for the fact that firefighters and police officers in Connecticut do not receive social security like traditional employees.  The wages are identical to those included in the new CBA between the Borough and Police Officer CBU recently approved.

In addition, the Borough agreed to increase the individual officer clothing allowance from SIX HUNDRED FIFTY and 00/100THS (650.00) DOLLARS per year to ONE THOUSAND FIVE HUNDRED and 00/100THS ($1,500.00) DOLLARS.

The total increase in cost for the three (3) year period for wages is estimated to be THREE HUNDRED EIGHT THOUSAND FOUR HUNDRED SIXTY ONE AND 17/100THS ($308,461.17) DOLLARS, with expected overtime costs based on existing three (3) year averages to be an additional SIXTY TWO THOUSAND EIGHT HUNDRED NINETEEN and 30/100THS ($62,819.30) DOLLARS.

Other Changes

The Borough and the Firefighters CBU also agreed to other language changes in the new CBA, primarily involving changes to shift structure and other day-to-day management issues.  In addition, language regarding drug and alcohol testing was memorialized as part of the new CBU after being included in a previous memorandum of agreement.  A copy of the entire agreement with all changes in highlighted yellow can be viewed here.

Our administration would like to thank the members of the Firefighters Local 1219, particularly the representatives on the negotiating team, for respectful and productive dialogue.  While the entire agreement was reached through “off-the-record” conversations and mediation, it was a long and often difficult conversation on both sides.  While both sides likely feel that more was conceded to the other than either would have liked, we ultimately were able reach agreement in an honorable manner that will benefit both Borough taxpayers and firefighters in different ways for years that will outlive the life of the current CBA.

Borough Fire Chief Ken Hanks and Deputy Chief Ellen Murray were instrumental in the process, particularly with regard to language relating to management issues.  Borough Labor Counsel Nick Grello, in consultation with Director of Human Resources John Lawlor and Comptroller Wayne McAllister, worked to finalize the language of the new CBA once the main components of the deal were completed.  This helped to reduce legal costs associated with the new CBA and avoided formal negotiations.

Never at question during the many months of dialogue was the collective commitment of Naugatuck Firefighters to protecting the Borough.  Several times through our numerous meetings, our negotiating team would begin by congratulating our firefighters for another tremendous job during a dangerous fire or other life-threatening incident.  This was especially true during sessions after the multi-family fire on the West Side, and the aftermath of Hurricane Sandy.  While many take for granted the amazing level of protection our firefighters provide to our community, numerous lives and hundreds of thousands of dollars of property are saved each year through their dedication, courage and expertise.  Many individual firefighters are equally involved in charitable and volunteer activities throughout the Borough.  We are grateful for the contributions to Naugatuck on a daily basis, the sacrifices made by each and every one of them and their family members, and their willingness to reach a reasonable and more sustainable agreement that will benefit Naugatuck taxpayers, particularly with regard to future pension and health expense obligations.

We would also like to thank Attorney Grello, Chief Hanks, Deputy Murray, insurance broker Rob Fitzpatrick, Human Resource Director Lawlor and Comptroller McAllister for their sound advice and diligence throughout the process.  The terms of the CBA are consistent with previous agreements reached with Borough police, teachers, clerical employees, and visiting nurses which combined modest pay increases with significant health care savings and long-term reductions to costly pension obligations.

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  • Robert M said,

    Mayor, How is the Borough expected to be able to pay for this contract in the short term. I understand that in 15 years or so we will start to see some minimal savings, but this is quite a giveaway to the Fire Union. If I read the Fiscal analysis correctly this will cost the taxpayers over $134,000 a year for the next three years! With the housing market still falling, job recovery stagnet and the lasted round of tax hikes on just about everyone from Washington DC, I do not see how this is affordable. In order to not raise taxes, what are we going to have to cut service from in order to pay for it.

  • Bob said,

    Hi Robert:

    I am sorry that I just noticed your comment well after you posted it.

    I disagree as to what you describe as minimal savings. The Borough’s pension system prior to changing to the defined contribution pension plans (the fire bargaining unit is the last to make the change for all the municipal unions) was very unsustainable. The savings from the change, which is likely to occur in approximately ten (10) years if not sooner (the projection is very conservatively based), will be significant and increase for each year thereafter. This is something we should have begun to do years ago, but it has to start at some point. The newly approved agreement also makes cost-savings changes in health care, particularly for retirees in future years.

    Quite frankly I do no believe we could afford not to begin this painful process. Under the current collective bargaining system, we can not unilaterally impose such changes. The switch in some of the other bargaining units will occur sooner. The alternative to beginning this process would be to obtain one (1) year wage concessions, and continue to allow an unsustainable system mortgage our future. This was done for many years without actually funding our pension system, which ultimately resulted in bonding our unfunded pension liability in 2003. We will pay for this until 2033.

    I am sure that there are no shortage of people who are willing to promise pay cuts/wage freezes, without concern for long-term fiscal sustainability. I do not happen to be one of them. We will have to remain vigilant to soften the tax burden in other areas by continuing to make difficult decisions. We are beginning our strategic planning process this month to provide guidance to address others areas for potential savings. Unfortunately our fiscal problems did not just appear overnight, but are the result of years of choosing short term solutions over long term responsibility.

    Thank you again for your comment and my apologies for the late response.

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