New firemen's pension plan offers higher payout

By: LISA CARTER , Staff Writer

02/18/2004

Selectman Charlie Walz said the plan would provide a bigger pension after age 65 while costing the town approximately $7,000 less per year in annual contributions.

Changes in the town's firemen's benefit plan, approved by the Board of Selectmen Feb. 9, are expected to provide better coverage for volunteer firefighters and reduce town costs.
The Firemen's Benefit Plan was established in 1989 to pay life insurance benefits to families following the death of a firefighter. It also provides a small monthly pension for firefighters above retirement age.
The town contributes to the fund annually, and the Firemen's Pension Committee oversees the fund's investments.
The plan is open to all active volunteer firefighters from the North Madison Volunteer Fire Company and Madison Hose Company No. 1 who have completed at least six months of service and are under age 60.
The percentage of benefits received is calculated on a vesting schedule. Both fire companies require 20 years of service to receive 100 percent benefits.
According to North Madison Fire Company member Stew MacMillan, the plan was intended as an incentive to keep members in the company.
Selectman Charlie Walz, liaison to the Firemen's Pension Committee, said that the benefits of the plan had not changed since 1989, and beginning two years ago, some firefighters began inquiring if the plan could be enhanced.
Under the current plan, a firefighter can elect to receive a $250-per-month pension at age 60 and continue to receive the benefits for a limit of 15 years.
Under the proposed plan, the pension would be extended to "payment for life" with a 15-year payout guaranteed.
If the firefighter should die before age 75, the remaining years of benefits would extend to the firefighter's spouse. The new plan would also allow the spouse to receive those benefits in a single payment.
The current plan also provides a life insurance policy for firefighters over age 65. Under the proposed plan, that life insurance would convert to a pension of $416-per-month if the firefighter waits until age 65 to receive it.
In sum, a vested firefighter would have two choices under the new plan - receive a $250-per-month pension after age 60 or wait until 65 and receive a $416-per-month pension.
Walz said most firefighters would probably opt for the after-65 pension. Although the per-month payout is higher, the cost to the town would be less.
"When you delay the payment of retirement (benefits) from 60 to 65, you get five more years of growth in the fund and five fewer years actuarially that you have to pay out," Walz said.
Another provision of the proposed plan would allow a firefighter who becomes disabled while fighting a fire to continue accruing benefits even though he or she would no longer be an active member of the company.
The disability would have to be confirmed by members of the fire company, then reviewed by the Firemen's Pension Committee.
Walz also noted that if approved, the four firefighters who are now receiving $250-per-month pensions would receive their benefits retroactively, meaning the benefits would extend for life, instead of the 15-year limit under the former plan.
Walz noted that the proposed changes would benefit both firefighters and the town's coffers.
"It's an absolute win-win situation," he said.
The changes will be voted on at a March 4 town meeting.