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The 1977 Police and Fire Pension and disability System is more than just a pension program…

The 1977 Police and Fire Pension and disability System is more than just a pension program…. The 1977 Police and Fire Fund serves five primary functions: . Provides a temporary disability benefit for disabled police officers and firefighters who will recover and return to full duty

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The 1977 Police and Fire Pension and disability System is more than just a pension program…

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  1. The 1977 Police and Fire Pension and disability System is more than just a pension program…

  2. The 1977 Police and Fire Fund serves five primary functions: • Provides a temporary disability benefit for disabled police officers and firefighters who will recover and return to full duty • Provides a long term disability benefit for disabled police officers and firefighters who are permanently unable to return to duty as police officers or firefighters • Provides a death benefit for surviving spouses and children in the case of a Line of Duty Death • Provides a retirement pension • Provides a pension for surviving spouses and children

  3. A Brief History of Police and Fire Pensions in Indiana The Bowen Merrill Fire in Indianapolis killed 13 firefighters on March 17, 1890. The families of these thirteen men received no benefit or compensation.

  4. A Brief History of Police and Fire Pensions in Indiana • Over time, incidents such as these raised public awareness of the dangers of providing for the public’s safety. • There were various attempts to provide death and disability benefits for these individuals. • Eventually the Indiana General Assembly got involved: • 1905 Fire Pension Act • 1925 Police Pension Fund • 1937 Fire Pension Fund • 1953 Indianapolis Police Fund • These were all pay-as-you-go programs, with exception of 1905 Fire Pension Act, which was funded by a Mill Tax that was later removed.

  5. A Brief History of Police and Fire Pensions in Indiana • In the 1970s, the Indiana General Assembly and leaders around the state recognized that the pay-as-you-go systems in place were unsustainable. • To address the issue, they wanted to create a long term solution: An actuarially funded system that provided reasonable disability benefits and an affordable pension. • Through the General Assembly, a team of knowledgeable legislators and staff members began work to resolve this issue.

  6. The 1977 Police and Fire Fund • Establishing the 1977 Police and Fire Fund was an enormous effort. Most states lacked the cooperative resolve to enact the necessary reforms. Indiana faced the challenge head on. • The groups that came together included the Indiana House, the Indiana Senate, the Indiana Association of Cities and Towns and employee groups such as the Fraternal Order of Police and the Professional Firefighters of Indiana

  7. The 1977 Police and Fire Pension Fund is… • 17,169 members • 92.7% actuarially funded* • $3.5 billion in assets *This is in the top 10% in the country according to the Pew Report.

  8. Key Features of Well Funded Plans* *National Institute on Retirement Security Study – June 2011

  9. The 1977 Police and Fire Pension Fund is well governed: • Indiana, unlike other states, recognized the changes due to the ADA and other changes in Federal law and made necessary changes, thus avoiding costly and prolonged litigation. The interested parties in the fund (PMOC, IACT, FOP, PFFUI, PERF) worked together to address these changes and created a fiscally responsible answer to keep the 1977 Police and Fire Fund healthy. • The 1977 Fund does not allow “spiking”: Unlike public safety pensions in other states, the 1977 Police and Fire Pension Fund pays retirement based on a Patrolman (Police) or Private (Fire) pay.

  10. The 1977 Police and Fire Pension Fund is well governed: • The 1977 Police and Fire Pension Fund actuaries were cautious and used conservative numbers when projecting retirement ages and included the actuarial calculations for the COLA in the funding formula. • In 1990, dynamic changes were made to the disability portion of the 1977 Police and Fire Fund. • The interested parties in the fund (IACT and the employee groups), through the PERF Advisory Board, approached PERF and PMOC and together they addressed the evolving issues with the Fund. • Due to the passage of the Americans with Disabilities Act, police and fire departments were required to hire people with pre-existing conditions. Indiana modified the disability section of the Fund to keep the Fund financially sound. • Adjusted the disability benefit in 1990 to account for degrees of disability. • In 2010, the interested parties saw the need to update the physical and mental pre-employment testing to keep the Fund financially sound.

  11. Why is it important to fund and maintain a comprehensive Pension System forPolice and Fire?

  12. Scott DavisFirefighter, Line of Duty Death • Hired in June 2005 • Laid off June 2009, Recalled August 2010 • Killed in Line of Duty June 2011 • Spouse and Children ages 8,11 and 14

  13. Scott Davis: Firefighter, Line of Duty DeathValue of Benefit in Defined Contribution System • *Total Benefit is a lump sum with no monthly payments to spouse or children. • **In addition, the surviving spouse would receive a one time death benefit from the state of Indiana at $150,000 and a one time death benefit from the Federal Government of $318,000

  14. Scott Davis: Firefighter, Line of Duty Death If the Defined Contribution Account Value of $68,004.80 were converted to an equivalent lifetime annuity for the spouse, the results would be: *Children receive annual benefit until 18 or emancipated. **Based on 2011 assumptions used under Internal Revenue CodeSection 417(e).

  15. Scott Davis: Firefighter, Line of Duty DeathCurrent Pension System In addition, the surviving spouse would receive a one time death benefit from the state of Indiana at $150,000 and a one time death benefit from the Federal Government of $318,000 *Children receive annual benefit until 18 or emancipated.

  16. Brent LongPolice Officer, Line of Duty Death • Hired in January 2005 • Killed in the Line of Duty July 2011 • Spouse and two Children, ages 11 years and 11 months

  17. Brent Long: Police Officer, Line of Duty DeathValue of Benefit in Defined Contribution System • *Total Benefit is a lump sum with no monthly payments to spouse or children. • **In addition, the surviving spouse would receive a one time death benefit from the state of Indiana at $150,000 and a one time death benefit from the Federal Government of $318,000

  18. Brent Long: Police Officer, Line of Duty Death If the Defined Contribution Account Value of $85,325.42 were converted to an equivalent lifetime annuity for the spouse, the results would be: *Children receive annual benefit until 18 or emancipated. **Based on 2011 assumptions used under Internal Revenue CodeSection 417(e).

  19. Brent Long: Police Officer, Line of Duty DeathCurrent Pension System In addition, the surviving spouse would receive a one time death benefit from the state of Indiana at $150,000 and a one time death benefit from the Federal Government of $318,000 *Children receive annual benefit until 18 or emancipated.

  20. Jason FishburnPolice Officer, Disabled in the line of Duty • Hired 2003 • Shot in the head in the line of duty July 2008 • Retired with Disability 2011

  21. Jason Fishburn, Police Officer, Disabled in the Line of Duty* Benefit in Defined Contribution System *Unlike Line of Duty Death, Line of Duty Disability receives no state or federal benefit. **Total Benefit is a lump sum with no monthly payments.

  22. Jason Fishburn, Police Officer, Disabled in the Line of Duty* Current Pension System

  23. Changing from a Defined Benefit to a Defined ContributionREAL COSTS • Employee and Employer must each pay 6.2% to Social Security (Total 12.4%) • Long and Short Term Disability Occurrences in the Line of Duty • Long and Short Term Disability Occurrences Not in the Line of Duty • Line of Duty Death Benefit – Lifetime benefit for spouse and dependent children

  24. Changing from a Defined Benefit to a Defined ContributionREAL COSTS *We contacted several insurance companies, including Boston Mutual, Colonial, Unum, and AFLAC. In general, they did not have a product that provided these benefits. In cases where they did, they stated that police and fire would be in the highest risk/cost categories.

  25. The 1977 Police and Fire Pension Fund • Well Governed • The 1977 Police and Fire Fund is an elite and well-designed Fund, unlike many Funds in the country. • Dynamic – Continually watched and updated to ensure we are able to take care of the people that need it the most, while providing a retirement for those who survive. • Changing to a defined contribution will cost more, with potentially catastrophically lesser benefit for Line of Duty Deaths and Injuries

  26. The 1977 Police and Fire Pension Fund Questions?

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