LMPD :: Louisville Metro Police Department

Deal would shore up Lexington police, fire pensions

Approval for agreement still needed from union members and the General Assembly


A deal with union leaders could solidify Lexington's troubled police and fire pension plan and pay down a massive unfunded liability that has put a financial drain on Kentucky's second-largest city, city officials said Friday.

The deal was reached late Thursday after long negotiations involving Mayor Jim Gray and representatives from the police and fire unions and pension board. The proposal still requires approval from union members and the General Assembly.

The agreement would quickly cut the pension plan's unfunded liability from $296 million to $161 million, according to the city's pension consultant, PFM.

It would preserve annual cost-of-living adjustments, though at lower rates, and would increase contributions from active employees and revamp the plan for future hires. In return, the city would boost its payments to the Policeman's and Firefighters' Retirement Fund by $9 million a year and would pay down the remaining unfunded liability over 30 years.

"We were on a Titanic-like course heading into an iceberg and we avoided it," Gray said.

He said the agreement would put the police and fire pension system on "an affordable, sustainable path." And it would put the city of 301,000 on "a path toward restoring financial strength" that would leave it better able to pay for other roads, parks and social services, he said.

The agreement would affect about 2,000 retirees and current workers.

Mike Sweeney, president of the Bluegrass Fraternal Order of Police, said both sides made sacrifices.

"This is pretty historic when a city and a group have gotten together to save a pension, and that's in essence what we've done," he said. "The alternative was pretty ugly."

Sweeney said the reaction from rank-and-file police members had been positive, and he predicted they will approve the deal.

"We've saved a lot of aspects of this pension that were up for grabs," he said.

Capt. Chris Bartley, president of International Association of Firefighters Local 526, said the agreement required "a lot of pain to go around," but said it would ensure that police officers and firefighters have pension protection for decades to come.

"This was not easy, but in the end we have a plan that finally puts our pension fund on sound footing," he said.

Under the deal, the city's annual payments would be $20 million per year, up from $11 million currently, to help support the pension plan and pay down the unfunded liability. Without the benefit changes, the city faced a $34 million yearly expense.

Salary contributions by active police and fire employees would go up from 11 percent to 12 percent.

New retirees would receive no cost-of-living adjustments for the first five years or until age 50, whichever comes first. The plan sets the minimum retirement age for current police and fire employees at 41.

Future employees would have to work at least 25 years before retirement, up from the current 20 years. The minimum retirement age for future hires would be 50.

The agreement in Lexington comes amid a much larger pension dilemma confronting Kentucky lawmakers, who are debating how to restore solvency to state pension plans with $33 billion in unfunded liability.

A legislative task force recommended pumping in more money without saying where the money would come from.