UFT Pension Deal Tags 'Unborn' on Contributions

MAYOR BLOOMBERG: Persistence pays off.

Departing United Federation of Teachers President Randi Weingarten said June 23 that her agreement a day earlier creating a new pension system for future hires was intended to address financial problems in both the retirement systems and the Department of Education while also preserving members' right to retire at 55 with full benefits.

Under the deal, however, those hired after the required state legislation is adopted would have to contribute 4.85 percent of salary to the pension system for the first 27 years of their careers. Those already on the job have their contributions reduced to 1.85 percent after 10 years of service. And new employees would have to work 10 years before their pensions became vested, or guaranteed, rather than the current standard of five years.

No Work Before Labor Day

Besides preserving the age 55 retirement age at a time when new members of the two largest state-employee unions face having to work until 62 before they are entitled to full pensions, Ms. Weingarten secured one other benefit under the deal, this one affecting all members: elimination of the two "prep days" prior to Labor Day, which means they will not have to report to school until after the holiday weekend.

ARTHUR CHELIOTES: Weingarten went too far.

But the cost to the city of granting those days off would be partly offset by reducing the guaranteed rate of return to UFT members with Tax-Deferred Annuity accounts from 8.25 to 7 percent. The city would also be able to reduce its health-benefit contributions under another provision that would make 15 years' service, rather than the current 10, the point at which future employees are assured of continued health coverage once they retire.

The agreement is the first one reached by a city union with the Bloomberg administration. Besides representing a reward for the Mayor's persistence in pressing for pension changes even after the head of the State Senate committee dealing with such issues pronounced such revisions a nonstarter earlier this year, it has the potential to create the framework for other deals on a less-costly Tier 5 for new hires.

TONY GARVEY: 'Creates pressure on other unions.'

The UFT accord does not contain some of the more-onerous provisions of the Tier 5 accord reached by Governor Paterson early last month with the Civil Service Employees Association and the Public Employees Federation—most notably the age 62 requirement—but the reductions in other areas mean municipal union leaders are likely to weigh carefully the pluses and minuses before leaping to strike similar deals. (CSEA and PEF made their deals to avert thousands of layoffs.)

Two of them, Teamsters Local 237 President Gregory Floyd and his Uniformed Firefighters Association counterpart, Steve Cassidy, declined comment last week, saying they wanted to assess the financial aspects of the deal in detail, though Mr. Floyd credited the UFT leader with being "able to maintain some of their benefits while offering the city some savings."

One official who spoke conditioned on anonymity questioned whether Ms. Weingarten had gotten full value under the deal even while acknowledging that the condition of the pension systems required serious action of this sort.

And Arthur Cheliotes, the president of Communications Workers of America Local 1180, criticized Ms. Weingarten for agreeing to the 15-year health-benefit vesting requirement, saying that because that issue affects all the unions, it should have been negotiated by the Municipal Labor Committee.

'Gave Mayor a Second Bite'

"Given the nature of health-care bargaining, it should not have been done unilaterally," he said in a June 25 phone interview. Referring to a health-benefits deal reached with the Bloomberg administration less than a month earlier that imposed new copays in some areas for employees and retirees, Mr. Cheliotes said, "We already gave at the office on the health benefits. The Mayor wound up getting two bites at the apple."

MLC Chairman Harry Nespoli, who replaced Ms. Weingarten in that role a year ago, had a milder reaction to the additional service requirement for health vesting, saying, "She didn't change the [benefit] itself. What she changed were the qualifications."

He declined further comment prior to a June 30 meeting at which MLC attorneys are supposed to offer an analysis of the potential impact of the change.

Lou Matarazzo, the Albany lobbyist for the Detectives Endowment Association, the Captains Endowment Association and the Public Employee Conference, questioned whether the deal would affect the discussions of the police and fire unions, which are trying to preserve existing benefits for future members until a commission can be empaneled to recommend changes in their pension systems.

Cites Systems' Differences

"It's comparing apples and oranges," he said, because of differences among various occupations that include the lack of an age requirement for police and firefighters and their current right to a full pension after 20 years of service. Another key difference is that both those groups have higher contribution rates for their pensions than civilian employees— between 5.5 percent and 7.85 percent, depending on the age at which each employee is hired, although the actual amount contributed by those employees is reduced by 5 percent under what is known as an Increased Take- Home Pay provision.

Tony Garvey, the Executive Director of the Police Pension Fund who previously headed the Lieutenants Benevolent Association, also invoked the "apples and oranges" analogy, but he said of the UFT accord, "Realistically, it does create some degree of pressure to complete a deal. The other unions certainly have a target to focus on. My instincts are that just like in a round of collective bargaining, that first deal could be a pattern."

Ms. Weingarten said in a phone interview, "It felt to me that controlling one's own destiny was a better path, even if it meant you were one of the first to cut a deal, than relying on the fact that the Senate would never go into session or the Governor would or wouldn't veto some extenders."

Paterson's Pension Threat

She was referring to Governor Paterson's threat to veto a series of bills that extend current pension provisions by two years, many of them affecting only uniformed employees but others, including the continuation of Tier 4 of the pension system, affecting civilian workers as well.

Referring to his veto last month of a bill carrying forward pension rights for future cops and firefighters, Ms. Weingarten said, "When you saw the veto of the Tier 2 extender, you realized this is a very different environment we're living in."

State and city budget problems also contributed to her concerns, she said, noting scheduled reductions in spending on education despite a court ruling guaranteeing a certain level of funding for the city public schools. Part of her thinking in crafting the deal and including the reduced TDA rate and the health-benefit vesting change, she said, was, "How do we immunize the schools from all these budget cuts?"

Her primary mission, she said both before and after concluding the deal, was to continue the age-55 retirement guarantee, which she called "very important to our members. Second, we ended up getting something for them that was also important: the week before Labor Day."

Return High Even If Cut

The Tax-Deferred Annuity accounts for all UFT members for more than a decade have provided a guaranteed annual return of 8.25 percent; if the legislation is approved, the return would be reduced to 7 percent, the figure that is guaranteed to those members under the State Constitution.

Ms. Weingarten noted that most other defined contribution plans both statewide and throughout the nation have variable rates of return which are currently averaging about 4 percent.

Mr. Bloomberg, in a statement announcing the deal, said the reduction in the guaranteed rate of return "will help the city weather a downturn in the financial markets." In fact, the primary short-term savings for the city stem from that proposed change and the 15-year requirement for employees to assure themselves of health coverage in retirement.

The Mayor estimated that the changes would save the city $2 billion over 20 years, but most of the savings from the contribution and vesting changes would not materialize until well into that period. That also means, however, that the annual savings will mushroom beyond that time, with one official saying they could reach $200 million a year.

Ms. Weingarten said she had done what she could to protect members' benefits while also dealing with the economic realities confronting the retirement systems and the Department of Education.

"Our pension systems have lost a lot of money," she said. "We tried to do something that worked for education and the education system and the pension systems we operate in."