A Study of Firemen’s Pension Systems
Results of Investigation Made by U. S. Department of Labor— Outstanding Features of Systems in Use by Some Larger Cities
EVERY city that is blessed with a paid fire department, must give some consideration to the matter of pensions. Or if a plan is in use, the men in charge of the system must be alive to changes that are going on due to economic transitions, and a more modern outlook on working conditions. The study made by the U. S. Department of Labor, should prove of interest to fire department officers.
SOONER or later, each city of any size must solve the qucstion of a retirement system for members of the fire department. either the entire department or those on the uniformed force. It is a step demanded by the men as a safeguard against the time when, through age or other causes, the means of a livelihood will be jeopardized.
This investigation, conducted by the U. S. Department of Labor, covered cities having a population of 400,000 and upwards. There are thirteen cities that have a separate firemen’s retirement system and in three cities, the pensions of the fire and police departments are combined.
IN Baltimore and in Boston the firemen are included in the the general scheme covering city employees, and in three cities they and the police are merged in a common system. Elsewhere they are covered by plans of their own, often dating back to a period very near the organization of the service as a city department. With the exception of the San Francisco system, all of these retirement plans were formed in the last century, the oldest being that of New York City, which commenced paying benefits in 1871. A number, however, have been so changed within recent years that they are practically new systems. Minneapolis, for instance, introduced important change_s in 1921, Milwaukee and Pittsburgh in 1924, and Detroit in 1925. Chicago made various changes in its system in 1917, and since 1925 has had several plans under consideration for reorganizing it, or for including it with the general municipal retirement plan.
The systems covered, with their approximate membership in 1926, are as follows:
These systems commonly cover only the uniformed force, but in a few cases it is specifically stated that all members of the department are to be included, while in others certain groups of the nonuniformed members are covered. The Detroit system, for instance, applies to uniformed and civilian groups alike, while the Chicago plan covers the fire-fighting force, the fire-alarm operators, and the linemen connected with the department.
IN Buffalo the system is managed by a board of 5, consisting of the mayor and 4 councilmen, in Detroit by a board of 5 all of whom are ex-officio members, in New York the commissioner of the department is trustee of the fund with full power to administer and control it, and in San Francisco the board of fire commissioners has the trusteeship of the fund. In the nine remaining cities the members of the force are represented on the administrative body, and not infrequently form a majority there. In New Orleans, for instance, the board consists of the president and secretary of the board of fire commissioners and the chief engineer of the department, ex officio, and 6 members of the uniformed force elected by their fellows; the Minneapolis board of 8 includes 6 active members of the force elected by their fellows, and in Milwaukee the board of 5 consists of the city treasurer, 1 member appointed by the mayor, and 3 elected by the firemen from their own number.
THRRE of the systems, those of Detroit, New York City, and San Francisco, are noncontributory, the cities bearing the whole expense, but elsewhere the employees and the cities join in supporting the plans. In regard to contributions from employees the contributory systems are evenly divided, five fixing the contribution at a flat sum monthly, and five requiring a percentage of the salary. In the first group the Cincinnati system calls for a contribution of 50 cents a month from each member, in Cleveland the payment ranges from 50 cents to $1.25, according to the rank of the member, in Minneapolis it is fixed at $1.50 a month, with an initiation fee of $10, in St. Louis it is $2 per month with an initiation fee of $5, while in Philadelphia members in active service contribute one day’s pay and pensioners one-half of a day’s pay, based on their salary at the time of retirement. In the second group the firemen of New Orleans pay 1 per cent of their salaries for pension purposes, those of Chicago and Pittsburgh 2.5 per cent, and those of Buffalo 4 per cent. Under the Chicago system a fireman who retires before reaching 50 must contribute an amount equal to 2.5 per cent of his final salary yearly until he reaches that age. Milwaukee has a carefully worked out system under which members pay 3 per cent of their salaries for their own annuities, 1 per cent for windows’ annuity, one-half of 1 per cent for ordinary disability benefit, and one-eighth of 1 per cent toward administrative expenses. In Minneapolis, New Orleans, and Pittsburgh, members are liable to assessments of from $1 to $2 upon the death of a fellow member.
As in the case of the police retirement systems, it is common for the cities to use for the benefit of the firemen’s fund a number of miscellaneous receipts. New Orleans, for instance, turns over to the fund all fines imposed upon the force and fines imposed upon others for violations of the fire regulations, 1 per cent of all license fees, payments for special details, rewards for special services, and proceeds from the sale of surplus and condemned property of the department.
Another source of income is often the tax on business done in the State by outside fire-insurance companies. It is not unusual for a State to levy a tax on such business and to turn over to the cities in which it is done all or part of the tax on the business done in that city, often specifying that a certain percentage of it is to go to the fire department’s pension fund.
The city also very generally makes a direct contribution of whatever amount is needed to maintain payment of pensions and benefits, either appropriating it each year from the general revenues or levying a tax especially for the purpose. Of the cities covered, Milwaukee alone has a carefully worked out system of contributions designed to cover each year the liabilities incurred that year. For each man on the pay roll it contributes annually 9 per cent of his salary for his pension, 2.5 per cent for the widow’s allowance, and one-half of 1 per cent for ordinary disability benefits. In addition, it contributes yearly one-eighth of 1 per cent of the aggregate pay roll toward expenses of administration and makes a deficiency contribution to meet extra benefits and the prior-service liability. Its contribution is raised by a tax levy not to exceed five-tenths of a mill on the dollar.
In several cities the fire department still maintains the custom of having an annual carnival, getting up an annual handbook with charges for advertising, or in some similar manner raising money either for the retirement fund or for the benefit association which is sometimes maintained in close connection with the retirement system.
IN Milwaukee the city and the members of the force make A regular contributions to defray the cost of administration, but elsewhere either such expenses are paid out of the general funds of the system or there is a rather vague division of costs between the system and the city, the former perhaps paying for clerk hire, postage, printing, and the like, while the latter carries such expenses as rent, heat, and light without making any distinction between what might justly be debited to the system and what is strictly chargeable to the department. In a few cases the whole cost of the system is carried as part of the department’s expenses.
AS a condition for retirement on allowance, age is rather an unimportant matter in the firemen’s systems, only five cities imposing an age qualification, and several of these modifying it by other circumstances. Philadelphia puts the age for optional retirement at 45, with a service requirement of 20 years. Chicago puts it at 50, but permits retirement earlier if the claimant has served for 20 years; in such a case, however, contributions to the fund must be continued until the retirant reaches 50. Minneapolis sets 50 as the normal age for optional retirement, but permits it earlier if 20 years of service have been given; in that case, however, the allowance does not begin until the retirant has reached 50. San Francisco makes retirement optional at 55 after 20 years of service, but permits it at any age after 25 years’ service. Milwaukee varies its age requirement according to length of service and to the allowance to be paid. Retirement is optional at 57 if the retirant has served 15 years, or as soon after 57 as 15 years of service have been completed. It is also permitted at 50, after 20 years’ service, or, with a reduced allowance, at 50 after 10 years’ service. The remaining eight cities have no age requirements.
It is not customary to set an age for compulsory retirement, the arrangements for disability retirement taking the place of such a provision. The San Francisco system specifies that a member may be compulsorily retired at 60 or over, if infirm or incapable, but in the other systems this is taken for granted.
A service requirement is universal. Milwaukee sets it at 15 years, though, as mentioned before, it sometimes permits retirement after 10 years, reducing the allowance when this privilege is claimed. Fight cities, Buffalo, Chicago, Minneapolis, New Orleans, New York, Philadelphia, Pittsburgh, and St. Louis, fix it at 20 years. San Francisco requires either 20 or 2o years, according to age, and Cincinnati, Cleveland, and Detroit call for 25 years.
All these systems provide for retirement on allowance in case of disability incurred in the performance of duty, without imposing any conditions as to age or length of service. The is the only form of disability retirement on allowance permitted in Detroit, Philadelphia, St. Louis, and San Francisco, but the other systems give pensions in case of ordinary disability, providing it is not due to the man’s own fault or misconduct. Cincinnati requires that such a retirant must have served not less than 5 years, and New York makes a difference in the amount of pension granted if the service is of less than 10 years’ duration, but with these exceptions there are no age or service limitations. Medical certification of disability, based upon examination, is generally required, and under some systems periodic reexaminations must be taken so long as disability pensions are paid.
NINE cities (Buffalo, Chicago, Cincinnati, Cleveland, Detroit, New Orleans, New York, Philadelphia, and San Francisco) give as the normal retirement allowance half or “not less than half” the salary drawn at the time of retirement, five of them modifying this provision somewhat. Chicago places on it a minimum of $600 and a maximum of $3,000 a year; Cincinnati puts a minimum of $75 and a maximum of $100 a month; Cleveland has the same maximum, but makes the minimum $87.66 a month; Detroit specifies that the allowance is to be half the salary attached to the rank held at the time of retirement, and that if this salary is changed at any time the pension is to undergo a corresponding change; and Philadelphia sets the allowance at onehalf of the average annual salary for the last four years of service.
The four remaining cities use different plans. Under the Milwaukee system the allowance consists of an annuity bought by the retirant’s accumulated contributions, plus a pension bought by the city’s accumulated contributions to his credit, the two together not to exceed 75 per cent of the highest salary received during the period of service. For those in the service before the present system was adopted, the city provides a prior service allowance. Minneapolis gives $600 a year to those retiring after 20 years’ service, and increases this by progressive additions for each 5year period in excess of the required 20. Pittsburgh grades its allowances into six classes, according to the rank held by the retirant, the annual amounts running from $600 to $900. St. Louis gives $600 a year.
Only two of these cities, Milwaukee and Minneapolis, make any distinction between the service allowance and the duty disability allowance. Cincinnati and New York, while making no difference between these allowances, pay a smaller allowance to those retiring on account of ordinary disability with only a limited term of service. The nine remaining cites pay the same allowance, whatever the cause of the retirement.
In cases of ordinary disability, Cincinnati pays no allowance unless the retirant has served at least five years. For those meeting this condition, the allowance is $3 per month for each year of service up to 25, at which point it reaches the minimum for service and for duty disability, and there it stops. In actual practice, since service retirement is permissible after 25 years of service, the retirant would probably claim that, rather than the disability allowance.
Under the Milwaukee system the allowance for duty disability is 55 per cent of the salary drawn at the time the disability was incurred, with an additional allowance of $10 a month for each child under 18 years old, the total amount not to exceed 75 per cent of the highest salary drawn during the period of service. For ordinary disability the allowance is 50 per cent of the salary, from which 4 per cent is deducted for annuity purposes; this allowance may not be paid for over five years.
Minneapolis grades the allowance according to the degree of incapacity. P’or those who are totally disabled the allowance is $900 a year; those who are permanently incapacitated for work as firemen but are able to do light manual labor or office work receive $480, and those who are disqualified for firemen’s service but able to do ordinary manual labor receive $180 yearly.
In New York the allowance is the same for service retirement, for duty disability, and for ordinary disability after 10 years of service; for ordinary disability with less than 10 years of service, the allowance is not to exceed one-third of the final salary.
The Cincinnati and Cleveland system provide that if a member is dismissed after a stated period of service, unless it be for certain faults specified in the regulation, he is entitled to a dismissal pension. In Cincinnati it is given for dismissal after 15 years of service and amounts to $2 a month for each year of service rendered, up to 25. In Cleveland the service period is 12 years, and the amount of the allowance is fixed at three-eighths of the salary.
(Continued on page 157)
Study of Firemen’s Pension Systems
(Continued from page 138)
ONLY two of the ten contributory systems, those of Milwaukee and Pittsburgh, provide for a refund of contributions in case of separation from the service before reaching pensionable status. Milwaukee provides that in case of withdrawal or dismissal the accumulated contributions for annuity purposes shall be returned with compound interest. In case of death, if the decedent leaves dependents no refund is made, since the plan embodies provisions for their care, but if there are none, a refund is made to the heirs or the estate. If a fireman in service at age 57 is unmarried or a widower he may receive a refund, with compound interest, of his contributions for the widow’s annuity, but it he marries thereafter his widow will not be entitled to any allowance. Under the Pittsburgh plan there is no refund in case of death, but if a member withdraws or is dismissed, his contributions are returned to him without interest.
TXT ITHOUT exception these systems make provision for WITHOUT widows and dependent children of members, and quite frequently it is provided that if there are no dependents of these categories, a pension will be paid to a dependent father or mother of the deceased. Under the Milwaukee system the funds for the care of dependents are financed as carefully as those for the firemen themselves, the employees and the city together contributing for the widows’ allowances, and the city alone contributing for the children’s allowances. Under this system in case of death from ordinary causes the widow’s allowance is the annuity purchasable by the accumulated contributions for this purpose. If death occurs in the line of duty the widow receives an extra allowance sufficient to bring the annuity up to what it would have been had her husband lived and continued his contributions up to the age of 57, or to such time thereafter as he would have completed 15 years of service. For each child under 18 there is an allowance of $10 a month, or $15 if the mother is not living. In the case of a duty death, the combined allowances of mother and children may reach a maximum of 75 per cent of the decedent’s final salary, but in case of a death from ordinary causes they may not exceed 50 per cent of the final salary. The ordinary widow’s allowance is continued throughout her life, but the extra allowance given in case of a duty death is discontinued if she remarries.
The plans of the other cities present certain variations. Pittsburgh has no pensions for dependents, but pays a death benefit of $1,100. Detroit and New Orleans do not pension dependents unless the death was due to injuries received in the service, but New Orleans in any case pays a death benefit of $1,000. The other systems all provide pensions for the widow, whether or not the death was due to the performance of duty, but in several cities the pension is larger in case of a duty death. They also either give a monthly allowance for the benefit of each child under a stated age, or provide that the pension shall go to the children if there is no mother living, or be continued to them if the mother dies before they have reached the age limit. In all these systems the widow’’s pension is limited to the duration of her widowhood.