Chariho School Parents’ Forum

July 19, 2009

Total pension liability for Hopkinton right now is estimated at $55,329,372.

 The HPD infamous 3% compound COLA pension –

There has been a lot of talk, most notably from frmr town councilman John Matson, that the pension was not implemented according to the letter of the law. I asked the town’s solicitor about it and she said it looked as though Matson was right, but she wasn’t sure, and that if it was true there probably wasn’t anything we could do about it now.

I have spoken with one other council person and told them what I’m going to say here – for the protection of the town I think we should have a written opinion from our counsel ending this question once and for all. If there was anything improper can we do anything about it, and if not, why.

How much is our pension system going to cost us?

The contract states that longevity and holiday pay are included in the calculation for pensions. I don’t have average holiday pay, nor do I know if that includes comp and sick time, so I won’t include it just to play it safe.

I also used a conservative average yearly wage increase of 5% (the actual current average is 7%).

I used the actual pay numbers from our latest retiree and worked backwards to determine how much the employee contributed over the years. The employee works 20 years (contract minimum) and lives for another 28 years (from 55 to 78).

The defined contribution method (private sector) says the employee contributes 8% of salary and the employer matches it (which is rare in this economic times).

The accumulated pension in the private sector method gains 3% interest and is paid out over the same 28 years. 

The defined benefit method (HPD) has the same 8%  employee contribution, but the town contribution is based on what benefits are defined to be paid – in our case it is the gross salary with a 3% increase, compound yearly.\

I want to compare what it is going to cost the town if we used a defined contribution pension program like private sector businesses and the defined benefit pensions found in the public sector – using the HPD as an example.

So, let’s get started.
The most recent employee to retire (Patrolman Georgetti) had a total income of $80,550 last year. Using the 3% compound COLA and assuming he lives the average of 28 years after retirement, he will be receiving $178,924 per year by then. We will have paid him a total of $3,458,085 over those 28 years. For that the employee paid $82,678 into the system while the town has to cover the rest (approximately $3m).

Now let’s compare that to the private sector.  If the same employee, making the same income, paid into a defined contribution plan, the employee  would contribute the same $82,678 but the employee would contribute another $82,678 – NOT the estimated $3m to meet the defined benefit obligation.

Assuming we had all 16 employees retire tomorrow (after working the required 20 years) – and didn’t add a single additional employee ever again (like Exeter) our total liability would be $55,329,372. That’s what we owe right now – assuming nothing is done retroactively to remove this crazy pension gift.

This is very serious stuff for a small town. I hope when the HTC votes on this contract they have taken these numbers into consideration. Anything other than a defined contribution plan is going to bankrupt the town. I’m happy to recalculate is someone points out an error in the method.

  Total 8%  
Year Pay Emp cont  
1         30,395.83      2,431.67  
2         31,995.61      2,559.65  
3         33,679.59      2,694.37  
4         35,452.20      2,836.18  
5         37,318.11      2,985.45  
6         39,282.22      3,142.58  
7         41,349.70      3,307.98  
8         43,526.01      3,482.08  
9         45,816.85      3,665.35  
10         48,228.26      3,858.26  
11         50,766.59      4,061.33  
12         53,438.52      4,275.08  
13         56,251.07      4,500.09  
14         59,211.65      4,736.93  
15         62,328.05      4,986.24  
16         65,608.48      5,248.68  
17         69,061.56      5,524.92  
18         72,696.38      5,815.71  
19         76,522.50      6,121.80 Total paid in
20         80,550.00      6,444.00           82,678.33
Pension begins1        80,550.00    
2         82,966.50    
3         85,455.50    
4         88,019.16    
5         90,659.73    
6         93,379.53    
7         96,180.91    
8         99,066.34    
9       102,038.33    
10       105,099.48    
11       108,252.46    
12       111,500.04    
13       114,845.04    
14       118,290.39    
15       121,839.10    
16       125,494.28    
17       129,259.10    
18       133,136.88    
19       137,130.98    
20       141,244.91    
21       145,482.26    
22       149,846.73    
23       154,342.13    
24       158,972.39    
25       163,741.57    
26       168,653.81    
27       173,713.43    
28       178,924.83    
      Total 3,458,085.81    
all 16   55,329,372.95    


  1. I’m at a loss for words…..where did I put that realtors phone number…Oh I forgot, property in Hopkinton is like an investment with Madoff.

    Comment by RS — July 19, 2009 @ 9:34 pm | Reply

  2. Your policemen retire after twenty years at full salary? Oh my goodness!!

    Comment by davidc — July 20, 2009 @ 5:19 pm | Reply

  3. Hate to say this but from what I know, most police and firefighters (non-volunteer), usually do.

    Comment by CharihoParent — July 20, 2009 @ 7:24 pm | Reply

  4. One of these days we will start dealing with the fact that with better medical care comes longer work years.

    Comment by Gene Daniell — July 20, 2009 @ 7:52 pm | Reply

  5. From what I’ve been told, the thinking seems to be that a police officer and paid firefighters (don’t know why they are different than volunteer firefighters) are worn out after 20 years because “It’s a high stress job”. Don’t anyone crucify me for saying, just repeating what I’ve been told.

    Comment by CharihoParent — July 20, 2009 @ 8:24 pm | Reply

  6. If so, maybe we should look at a job retraining benefit so they can do a different job for the next ~20 years.

    Comment by Gene Daniell — July 20, 2009 @ 8:45 pm | Reply

  7. I just came from the Hopkinton TC meeting (I did leave before the end, and I do not know if the Police Contract passed. ) What I DO know, after hearing the line by line account of the changes is that the negotiations went well. While the changes to the contract seem small, they are the beginning of an attempt to bring a municipal contract in line with what a private contract would be, and THAT is a big gain.
    Certainly, it is easy to sit on the sidelines and discuss what should or should not be done. However, the difficult part is to sit and negotiate an entrenched contract. One that has stood and been accepted for many years. The small steps taken in this contract are actually a very big step for our town, and I say “Well Done, Mr. Buck”.
    In the coming years, we must strive to continue to review sick time, vacation time, the right to work when out of work on a job related injury or illness, and other aspects of these contracts that just do not meet private sector contracts. The first step has been made, and both the police department and Mr. Buck deserve our thanks.

    Comment by Dorothy Gardiner — July 20, 2009 @ 8:56 pm | Reply

  8. It’s not really that hard. Its only hard telling folks they have to tighten their belts, the process of going about it is very simple. The town never ever has a problem telling me my taxes are going up year, after year, after year, after year…sorry got carried away there.

    Do you think the officers are going to leave an $75K+ job in these economic times with 12%(21% actual) unemployment???

    Does Hopkinton really need a 3rd shift? I have yet to see a justification of this shift.

    We’re there any cuts in the contract, or does the thanks go to keeping the increase smaller? This smacks of Obamanomics…..If it weren’t for me, the increases would have been much greater…..pat me on the back please. Meanwhile my taxes have never ever decreased and have ALWAYS outpaced inflation….

    Comment by RS — July 20, 2009 @ 9:35 pm | Reply

  9. TITLE 45
    Towns and cities
    CHAPTER 45-21.2
    Optional Retirement for Members of Police Force and Fire Fighters
    SECTION 45-21.2-22

    § 45-21.2-22 Optional twenty year retirement on service allowance. – The local legislative bodies of the cities and towns may, by ordinance adopted, permit the retirement of a member on a service retirement allowance as follows:
    (1) Any member may retire pursuant to this section upon his or her written application to the board stating at what time he or she desires to retire; provided, that the member, at the specified time for his or her retirement, has completed at least twenty (20) years of total service, and, notwithstanding that the member may have separated from service;
    (2) Upon retirement from service pursuant to subdivision (a), a member receives a retirement allowance which is a life annuity terminable at the death of the annuitant, and is equal to two and one-half percent (2 1/2%) of final compensation multiplied by the years of total service, but not to exceed seventy-five percent (75%) of final compensation;
    (3) Upon the adoption of a service retirement allowance, pursuant to this subdivision, each member contributes an amount equal to one percent (1%) more than that contribution required under § 45-21.2-14;
    (4) This section is exempt from the provisions of chapter 13 of this title.

    TITLE 45
    Towns and cities
    CHAPTER 45-21.2
    Optional Retirement for Members of Police Force and Fire Fighters
    SECTION 45-21.2-5

    § 45-21.2-5 Retirement on service allowance. – Retirement of a member on a service retirement allowance shall be made by the retirement board as follows:
    (9) Any member of the Hopkinton police department may retire pursuant to this subdivision upon written application to the board stating at what time the member desires to retire; provided, that the member at the specified time for retirement has earned a service retirement allowance of fifty percent (50%) of final compensation for at least twenty (20) years service; final compensation for Hopkinton police department members is based on the compensation components of weekly salary, longevity and holidays with longevity of the members highest year of earnings and members shall receive a three percent (3%) escalation of their pension payment compounded each year on January 1st following the year of retirement and continuing on an annual basis on that date.

    Comment by Lois — July 21, 2009 @ 12:11 am | Reply

  10. 2.5% X 20 Years = 50%

    Even Section 45-21.2-5 (9) states 50% of final compensation. So, take the final compensation and divide it in half. That is the first year’s compensation. 3% the following year added to that figure, then compounded after that from the previous retirement compensation.

    Historically, the first year retirement was offered in the early 90’s, there was a straight forward retirement.

    Next contract in 95 was 3% COLA not compounded.

    Then the union wanted health insurance. The council in 99 offered them a 3% compounded COLA instead. So, when a Hopkinton officer retires, they have no health insurance. Most communities have retirement health insurance.

    Apparently, the 4 councils at the time, who offer the compounded COLA did their math, and discovered that the 3% compounded COLA was cheaper than health insurance after retirement. Now we all know how expensive health insurance is. Considering they have families, insurance liability would be higher.

    This was confirmed with the retirement board.

    One last thing, the town of Hopkinton pays into the retirement plan now. This is why the board bills the town now. The town will not be paying their full salary upon retirement.

    Oh yeah, the officers pay 9% into their plan. In reading RIGL, this is state law. If I don’t forget, I will try to locate that tomorrow. Goodnight.

    P.S. Longevity has been removed from the contract.

    Comment by Lois — July 21, 2009 @ 12:41 am | Reply

  11. RIGL 45-21.2-14 = 7%
    RIGL 45-21-52(3)(C) = 1%
    RIGL 45-21.2-22(3) = 1%

    Total 9%

    An officer also confirmed this figure.

    Comment by Lois — July 21, 2009 @ 1:06 am | Reply

  12. My understanding is that only 2 towns offer compounded COLA’s. Only 4 towns in RI do not offer any health insurance after retirement. Hopkinton is one of them.

    Comment by Lois — July 21, 2009 @ 9:04 am | Reply

    • Is this health insurance offered at a normal retirement age(62-67) or when an officer with 20 years decides to retired at age 45?

      Comment by RS — July 21, 2009 @ 10:07 am | Reply

  13. There is two key reasons why I don’t support public sector pensions:

    1. I don’t trust elected officials to properly fund them, all to often you hear about pension fund payments being held up in tough times.

    2. The pensions and accompanying complicated special contract provisions makes evaluation of thses arrangements extremely difficult, if not impossible, for the average person.

    The system needs to be reformed to 401K type or allow the unions to run a retirement plan (like the UAW is doing now) where the gov’tal entity is required to make the payments.

    Comment by Gene Daniell — July 21, 2009 @ 9:13 am | Reply

  14. I spent my morning reading and had a very nice trip through the statutes, but the remaining question is what is the towns liability for a retired officer? Are you saying the only cost to the town is the current contribution and after an officer retires the cost to the town is zero(0)?

    Comment by RS — July 21, 2009 @ 9:59 am | Reply

  15. Reposted from #8: Does Hopkinton really need a 3rd shift? I have yet to see a justification of this shift.

    No replies?

    Comment by RS — July 21, 2009 @ 10:08 am | Reply

  16. 3rd Shift: I will inquire on the 3rd shift. My understanding is that we are required to have some type of coverage, and that we would be paying either way. But, I will check. (I believe it is some type of mandate.)

    Retirement: The town would be paying something at first after retirement. It certainly wouldn’t be the officers full retirement. That is why the town and the officers invest in the retirement while they are on active duty. I am terrible at explaining it, but you can refer to it in the statutes in section 45 of the RIGL. Read about the board’s responsibility, the state treasurer’s, and the actuary. So, if I am right, the board bills and the town pays until it is fully funded. If we don’t, it comes out of state aid.

    Now, if you were negotiating a contract, what would cause you to discontinue your compounded COLA? Well, in the eyes of the police, it is the health insurance. Whether you agree with me or not, Hopkinton made a good choice. And I believe the police should be commended.

    Hopkinton isn’t having any trouble with their funding. There are some cities and towns that are. Westerly happens to be one of them. I will see if I can find that document on-line and get back to you.

    Health: I got the impression that the health is effective during and after active duty. They get health now, and it just continues. I believe it is Healthmate.

    Pension: One last thing. The figure the state retirement board is based on base salary plus longevity and holidays. It is in the statutes. Overtime pay and other payments to the police are not figured into the formula. So, my understanding is that using Giorgetti’s full compensation for the year is incorrect. Plus, longevity is no longer in the contract. So, for the future, the calculation would be different.

    Comment by Lois — July 21, 2009 @ 1:45 pm | Reply

    • I do know the contract calls for a 3rd shift, which is contractual(negotiable), but have no idea about the state statutes. I suppose it is possible some of the “free money”(federal) we get for police programs might require a 3rd shift. If any of these are true I think an analysis would be in order to see ift the benefit is worth the cost.

      Comment by RS — July 21, 2009 @ 2:04 pm | Reply

    • So do I understand correctly I am paying for this contract on a town(porperty tax) and state(income tax)level?

      Comment by RS — July 21, 2009 @ 10:46 pm | Reply

  17. Longevity is part of pension (as is holiday pay) but I don’t see overtime listed -however, in the ProJo article showing the top pensions in the state (which are on the Train) the top person got such a high amount because of overtime – but he was a teacher so perhaps its different/ The number I used does NOT include overtime. juSt longevity. And now the longevity is built into the salary (and as such will increase more over time – 2% of XX is more than 2% of x.

    Comment by Editor — July 21, 2009 @ 10:40 pm | Reply

  18. The town pays its bills, but written in the laws are stipulations that if a town does not pay, then the state will get it anyways — through state aid. Either way, the town/taxpayer pays.

    Now, regarding longevity written in the contract. It isn’t anymore. Those that accumulated longevity from past contracts didn’t lose it, but it is not offered in the current contract from this point on.

    Bill has had a beef with longevity and the teacher’s, recall? I would think he’d be thrilled.

    Comment by Lois — July 21, 2009 @ 11:54 pm | Reply

  19. Bill, where did you get Officer Giorgetti’s figures from? I was under the impression that he has been there for more than 20 years?

    Comment by Lois — July 22, 2009 @ 12:00 am | Reply

  20. Lois,
    Tom said they took the total longevity and wage, added it together and made an hourly wage. Thus the longevity is built into the wage now essentially making it a step increase – problem is the amont cmpounds on itself. The good side is that it doesn’t show up in non-step years.

    Georgetti was on for 27 years I think – im just using him as an example and used the 50% salary figure. But going back i do see it had overtime in it, my bad. But it doesn’t really matter what the amount is, its the difference between defined contribution versus defined benefit that’s important. Andthe difference as we see is substaintial. Very substaintial. If we took todays salaries and moved forward 20 yeears (instead of assuming they all started 20 years ago) we would see that the cost to the town (or state, which is still our money) is much much more. the $23m figure is low low low compared to what it will really be.

    Comment by Editor — July 22, 2009 @ 7:17 am | Reply

  21. RS, of course. who else would pay? we could try to say its a state pool that others pay for, but they are saying the same thing in Barrington. We are all in the same boat (except the first one to used a defined contribution plan).

    Comment by Editor — July 22, 2009 @ 7:21 am | Reply

  22. Bill’s right that the key issue is defined benefit vs defined contribution.

    These days we have the dual problem of living longer and the age pyramid is upside down, same issue as social security. There’s just not enough working people to pay the pension bill.

    A pension is like a group insurance plan, but with the pace of medical advancement all the traditional life assumptions are broken.

    It’s true that gov’t workers were promised a pension to offset low pay, so for those in that position they need to be treated fairly. Although many of the pay rates I’ve seen recently are better than private sector workers.

    Fundamentally the system needs to become one where people manage their own retirement plan.

    Comment by Gene Daniell — July 22, 2009 @ 8:53 am | Reply

  23. Yes, public and private are way out of wack. I do not know anybody that would doubt that. But, it is unrealistic to get it back with one contract and one town. This is a statewide problem. The other towns need to step up to the plate. If they don’t then Hopkinton really doesn’t have a leg to stand on in the future. Hopkinton made a big step this contract. Agree or not. That is my opinion.

    Comment by Lois — July 22, 2009 @ 12:46 pm | Reply

  24. Lois … Correction, it’s a nation-wide problem. And you are entirely correct that one town can’t move mountains.

    Comment by Gene Daniell — July 22, 2009 @ 1:38 pm | Reply

  25. Ironic that this came out today on Projo.

    Comment by CharihoParent — July 22, 2009 @ 2:10 pm | Reply

  26. Gene, I disagree. East PRov had the courage to move mountains and they did.

    Comment by Editor — July 23, 2009 @ 11:35 am | Reply

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