More six-figure pensions on the horizon for Omaha - Omaha.com
Published Sunday, September 1, 2013 at 12:30 am / Updated at 11:29 pm
More six-figure pensions on the horizon for Omaha

When Omaha Fire Chief Mike McDonnell's separation deal was announced last week, the 47-year-old chief stood to receive the largest pension for a city retiree: $130,800 a year.

Sound familiar? It should. In March 2012, when then-Police Chief Alex Hayes retired at age 48, he nabbed the top pension himself: $128,121 a year.

Such pensions come after new agreements with unions, deals that were promised to reduce costs and help right the city's troubled police and fire pension system.

Despite the changes, there are still a few people, such as McDonnell, who could benefit from previous contract provisions that won't be available to future employees. For others, recent contracts will result in a bigger pension check, as it did for Hayes.

Even though McDonnell's special retirement agreement blew up Friday, his status as a high pension earner is secure. Even without the sweetener offered by Mayor Jean Stothert, McDonnell is in line to become the city's No. 2 pension earner when he does leave city employment.

Meanwhile, rising salaries mean we can expect to see more six-figure pensions in the future.

The city doesn't track the pensions it would pay to people who have yet to retire, said Deb Sander, City of Omaha payroll manager. So there is no official list of the biggest pensions on the horizon.

By looking at tenure and salaries, though, The World-Herald projects that about a half-dozen employees have the mix of high pay and long service it would take to qualify for a pension hovering around six figures over the next few years.

Two assistant fire chiefs, two deputy police chiefs and two deputy city attorneys are probably next in line to get six-figure retirement packages, although it would be hard for any of them to take the top pension spot.

Highest annual pensions Omaha pays


The City of Omaha has about 2,300 people collecting annual pensions. Of those, there are:

14 over $100,000

46 over $90,000

151 over $75,000

690 over $45,536*

*Omaha's median household income.

SOURCE: City of Omaha

Most of the big pensions go to former police and fire administrators. Those groups aren't part of the much larger police and fire unions that have drawn much of the attention on pension problems. The managers have their own unions, with their own unique contracts. But they tend to have many of the same benefits as the rank-and-file public safety employees.

McDonnell is one of just four fire managers who signed a contract with the city last August locking in the ability to spike pensions upon retirement. New managers, hired after that contract went into effect, won't have the same opportunity.

“Those guys are the last of a dying breed,” Sander said. “They're the last with that provision.”

The contract was the second negotiated by the Omaha City Council's labor contract team, of which now-Mayor Stothert was then chairwoman.

For that small group, pensions are based on the highest year of pay over the last five years. If he leaves in the near future, McDonnell could base his pension on his pay from September 2011 through September 2012.

A handful of factors have boosted his pay during that time:

In September 2011 and March 2012, McDonnell sold back 40 hours of vacation time, effectively giving him credit for two extra weeks of work. This will continue to be available to many city managers, including those in fire management.

In December 2011, he emptied his bank of compensatory time for some $22,000 that boosted his pension. Only the old guard of fire managers will be able to do this in the future.

The contract from last August awarded retroactive raises to fire managers, further increasing the amount McDonnell was paid over that time.

During that 12-month period, McDonnell was paid about $175,000.

The deal struck with Stothert's administration — a deal now canceled — would have given McDonnell credit for an extra year of service, giving him the maximum pension he could earn: 75 percent of what he made in his top year.

The complex calculations that go into pension plans are almost completely foreign to most private-sector workers. According to the Employee Benefit Research Institute, only 14 percent of private workers have access to a pension plan.

That's down significantly from years past. Thirty years ago, nearly 40 percent of private workers were offered some sort of pension.

“The people who have retired have spent their careers working their jobs. They played by the rules. They did what they were supposed to do, they made their payments,” said John Corrigan, a lawyer who represents the fire union. “They have a contractual right to receive the benefits that were promised to them.”

Excluding McDonnell, eight of the top 10 city pensions will go to former public safety employees; six are fire administrators.

Deputy Chief David Baker would already be on the list, but he instead went into the city's deferred retirement program.

He technically retired shortly after he was passed over for promotion to police chief in August 2012.

Since then, his monthly pension checks — $9,776.20 apiece — have been put into an account that he can collect whenever he leaves the department for good. His pension amount is largely based upon the salary he drew while filling in as interim chief last year.

The Police Department was ground zero for a pension overhaul that targeted spiking. Police officers used to be able to work long overtime hours in their final years before retirement, artificially boosting their pension.

In 2010, the police agreed to a contract that eliminated that practice in favor of a career overtime average, called COTA. That approach averaged an officer's overtime over a career, reducing the inflationary effect a late-career spurt of overtime could have on retirement.

In 2011, police managers agreed to a new contract that included COTA, too.

But for them, it had the opposite effect. Managers can't work overtime, so it was difficult for them to spike under the old contract. But credited with overtime they worked as young officers, they can see the value add up quickly.

In Hayes' case, for example, COTA added about $16,000 to his annual salary. That wound up bumping his pension checks by about 10 percent.

For another police administrator, Deputy Chief Mary Newman, COTA likely will be enough to qualify for a pension of more than $100,000. Newman will reach 25 years with the city next March, qualifying her for a pension worth 75 percent of her salary of $130,000.

Because of COTA, she'll be given credit for about 144 hours of overtime, as well. That's a $10,000 bump, which would bring her pension to around $105,000.

When Baker officially leaves his city post, he will replace Steve Jensen, former planning director, for the third-largest city pension.

Jensen, who retired in 2009, was the rare case of a highly paid civilian employee with a long tenure — a traditional recipe for a large pension.

He worked for the city nearly 34 years, moving up through the ranks. When he retired, he was making $143,500. That coupled with his long service got him a pension of nearly $115,000 a year.

It's common for department heads to make some of the city's highest salaries, but not many have Jensen's longevity.

Two well-paid directors from just last year are no longer with the city and won't earn pensions at all. Two of the highest-paid civilians now — Public Works Director Bob Stubbe and City Attorney Paul Kratz — have less than 20 years apiece with the city.

Deputy City Attorney Tom Mumgaard could be the next civilian to crack the top 10 list. He entered the pension system in 1982, putting him at 31 years with the city. His current salary is $136,000. Even without being credited for vacation sellback, that would put him at roughly a $93,000 annual pension.

If he stays on for a few more years, he can potentially increase his salary while adding to his years of service, which will drive up that number.

Despite all the effort to reduce pensions, there's hardly any chance the top pension earner will stay there long-term. After all, the largest part of the pension calculation is a person's salary, and salaries continue to rise.

Still, said David Kramer, an attorney who practices public labor law, that rise in salaries is gradual and has been offset by several contracts that were negotiated in part to address the pension system.

While Omaha's pension system is still generous, he said, taxpayers don't have to fear a steady stream of record-setting retirements in the near-term.

“Over time, the growth of pensions is going to be much more due to the growth of salaries than any gaming of the system,” he said.

Deputy City Attorney Bernard in den Bosch agreed.

“The tools have been put into place over the past five years to eliminate a person getting a pension abnormal from their peers,” he said. “It's going to be primarily salary. And as salaries go up, so will pensions.”

Contact the writer: Matt Wynn

matt.wynn@owh.com    |   402-444-3144    |  

Matt does document- and data-driven stories and builds things for the Web that leverage both.

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