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Wednesday, January 29, 2014

BULLETIN: The City of Houston Has Sued The Firefighter Pension System

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BULLETIN -- In the face of growing concern about its ability to meet long-term retiree pension obligations, the City of Houston filed a lawsuit today against the Houston Firefighters’ Relief and Retirement Fund (HFRRF), one of three pension systems covering City employees. The lawsuit seeks to enable the City to have the same input on contributions and plan design for HFRRF that it already has with the Houston Police Officers Pension System (HPOPS) and the Houston Municipal Employee Pension System (HMEPS).

“State law that applies only to Houston is unreasonably restricting our ability to protect taxpayers and keep our commitment to secure and sustainable firefighter retirement benefits,” said Mayor Annise Parker. “It is clear from the difficulties experienced by other cities that this is an issue that must be addressed. We have to have the ability to negotiate these benefits at the local level and be able to verify the financial health of HFRRF. We cannot and will not kick the can down the road.”

Through the “meet and confer” process with HPOPS and HMEPS, the City is already able to negotiate employee contributions, retirement ages and benefit levels for police and municipal retirees. In the past, these negotiations have resulted in agreements that have improved the city’s ability to meet its long-term obligations for these two pension systems. Under existing state law, there is no similar process available for the firefighter pension system. Contrary to the laws that apply to other cities, Houston is excluded from the important financial decisions about benefit levels and the contributions to support those benefits for its firefighter retirees. These decisions are made by boards controlled by current and retired firefighters who have an obvious conflict of interest. Several attempts to obtain a legislative cure for this problem have been unsuccessful.

“Litigation is the only remaining option available to the City,” said City Attorney David Feldman. “Instead of Houston determining, or even having a meaningful say about the level of its own contributions to HFRRF, that decision is being made by people likely to benefit from the decision. The City is asking the court to declare unconstitutional the laws that allowed this. The suit also seeks to end the practice of HFRRF using taxpayer money to lobby in favor of such laws.”

Firefighters retiring with 30 years of service are currently eligible for an average initial monthly lifetime annuity of 94 percent of their average pre-retirement salary, plus an average estimate lump sum of approximately $850,000. The value of the average combined benefits for these retirees is estimated to be $1.6 million, which is equal to a lifetime monthly annuity of 197 percent of their average pre-retirement salary.

The City’s lawsuit does not seek any change in benefits being paid to current firefighter retirees, nor would it have any impact on HPOPS or HMEPS. The lawsuit was filed by the City’s Legal Department in the state district court of Harris County. Information about the lawsuit is available on the City’s website.

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