The Truth About Firefighter Retirement Benefits
Firefighters often retire earlier, and earn a higher percentage of their salary in retirement than many other professions. There are many factors that contribute to the enhanced retirement benefits that firefighters have fought for over the past 50 years. Here are some facts that tend to be "overlooked" in reports on firefighter retirements, salaries and benefits:
"Generous" firefighter benefits did not cause huge "unfunded liabilities"
Unfunded liabilities in public retirement systems can be a significant problem, however anti-worker groups have created an unrealistic picture of what this means. The excessive unfunded liabilities were not caused by firefighters, public workers, or overly generous benefits. The unfunded liabilities seen over the last decade were caused almost entirely by the decline in the stock markets during the Great Recession. Before the Great Recession, caused by irresponsible Wall Street investments and Big Bankers, the unfunded liabilities were manageable and anticipated. Public retirement plans on average were 86% funded, better than nearly all private pension plans and considered perfectly "healthy" by economists and actuarials.
As the markets recover, the unfunded liabilities have continued to shrink dramatically. Thanks to public pension and health care reforms (some much needed, and some knee-jerk reactions to well-funded Wall Street disinformation campaigns) the risk from unfunded liabilities has decreased further in recent months.
CalPERS was about 55 percent funded in the early 1980s, following another severe recession. As the economy rebounded, so did CalPERS funding status. By 2000, the system was 130 percent funded. During the great recession, CalPERS dropped to about 60% funded, then rebounded to 73% (in 2014) and continues to rise. A pension plan's funded status or unfunded liability is a snapshot in time that can change significantly over the course of a few years, depending on whether the economy and financial markets are strong (better funding) or weak (poorer funding).
CalPERS currently reports a funded status of about 70 percent funded based on market value of assets, which is regarded by many experts as acceptable. Fitch Rating Agency recently stated that a 70 Percent funded status or above is adequate and under 60 percent is weak. http://www.calpersresponds.com/downloads/key-observations-lh-report.pdf
Firefighters do not receive Social Security
Marin firefighters (like most other Marin public employees) are not eligible to receive Social Security. Their retirement system is their only source of retirement income. Their employers - the cities and counties - do not pay the 6.25% payroll tax for Social Security, and this payroll cost savings is instead invested in a traditional defined-benefit retirement plan. These plans provide post-retirement income comparable to a 401K savings type plan PLUS Social Security, for a retiree who planned and saved appropriately. The lack of Social Security benefits and the associated payroll savings to local government is rarely mentioned in discussions about public employee benefits. Because firefighters can't collect social security, they have negotiated over decades to pay for increased traditional retirement benefits instead.
65% of benefits are paid from interest and dividends on investments
The remaining 35% is paid by a combination of the employee's contribution through payroll deduction (14%-18% of salary), and the employer's direct contributions. The employer's contribution fluctuates between 0% and 30%. When groups like Citizens for Sustainable Pensions shout "we pay your pension!" to firefighters, they are simply wrong. CalPERS shows that for every dollar paid to retirees, 65¢ comes from Investment earnings, 22¢ comes from employers, and 13¢ comes from member contributions.
Firefighters typically work 56 hours per week and earn 40% less per hour
A 56-hour work-week is 40% more hours than the average worker's 40 hour week. Firefighters in Marin work 48-hour shifts and respond to emergencies at any hour, night or day, 365 days per year - even on holidays like Christmas and Thanksgiving when virtually no one else is working (and yes, this includes the time they sleep at the fire station). Because they work 40% more hours, but earn a salary comparable or less than other technically skilled professionals, their hourly wages are actually relatively low. In Marin, the average fire engineer with 15 years of experience earns $33 per hour (salaries did not increase in the six years from 2008-2014). A comparable earner in the private sector makes 40% more per hour than a firefighter. Marin firefighters are paid fairly and don't complain about their wages, but the hourly wage distinction is important when countering claims that firefighters are overpaid.
A typical firefighter workday consists of training and education, residential and commercial fire inspections, vehicle and tool/equipment maintenance, fire hydrant maintenance, fire drills, public education - all of which are set aside at a moment's notice to respond to emergencies and calls for assistance. Firefighters responded to nearly 100,000 emergencies at all hours, day and night, in Marin in 2016 including: structure fires, wildfires, vehicle fires, urban rescues, hazardous material spills, medical emergencies, vehicle accidents, cliff rescues, water rescues, confined space rescues, search and rescue, and thousands of calls for help that don't fall into these categories.
Note: Some, notably the anti-labor group "Citizens for Sustainable Pensions (CSPP)," have claimed that firefighters do not actually work 56-hours per-week, because they are not physically fighting fires, engaging in rescues, and performing CPR or other lifesaving measures for the entire 48 hours of their typical shift. This claim by CSPP's David Brown is patently false and quite easily rebutted.
Shorter life expectancy
Firefighters have shorter life expectancies than the average population and are three times more likely to die on the job, partly due to inherent risks, physical and mental stresses, and exposures to toxic and carcinogenic compounds released in smoke (source: US Bureau of Labor Statistics, University of Cincinnati). Do not confuse rhetoric showing a CalPERS study that "safety" members live as long as other employees! The majority of "safety" members in the retirement systems are corrections officers, law enforcement, probation, and court employees who, unlike firefighters, do not have a reduced life expectancy from toxic exposures and other physical job stresses.
Do not be confused by groups who claim "a firefighter in Tiburon is not the same as a firefighter in Chicago," insinuating that the job in Marin is less dangerous, or will have less exposure. The job is the same. The exposures are comparable. Marin firefighters routinely fight structure fires and vehicle fires, and often spend 14-day (continuous) shifts fighting wildfires, with 24-hour per-day toxic (yes, forest and WUI fire smoke is carcinogenic) smoke exposure - an experience "big city" firefighters do not face. The significantly smaller numbers of firefighters on a fire engine in Marin means they must spend much longer periods than their big city counterparts "inside" while fighting fires, since there are not enough personnel available to relieve them.
The list of Marin's fallen firefighters shows a dramatic increase in the occurrence of deadly cancers, with Marin firefighters often dying within 1-3 years of retirement. With at least 6 cancer deaths in the past 10 years of active firefighters from 30 to 56 years of age, and nearly a dozen others undergoing treatment, the effects of modern synthetics and the toxic smoke they produce when burning face firefighters with new dangers, every day on the job.
Firefighter overtime is not included in retirement calculations
Firefighters can not "spike" their pensions with overtime or other perks, despite media reports to the contrary. Public employees fought to eliminate these wasteful and unfair practices more than 20 years ago. Retirements are calculated based on averaging the base salary over several years, and NEVER include any overtime pay or other wages that are not part of the base compensation (an important distinction is that some pay, like education incentives and allowances, are included - overtime is not). One local newspaper and a prominent opinion columnist continue to print articles and editorials claiming firefighters include overtime in their retirements, despite being shown written contracts and legal rulings that prove their statements are false.
Retirement savings goes back into the "system" when a firefighter-retiree dies
In a public defined benefit retirement system, when a firefighter dies, their retirement contributions and all earned interest go back into the "system" to help pay for other living retiree's benefits, unlike a private sector 401K where the retiree's family keeps 100% of their retirement contributions (and interest earnings and market growth) upon their death. A firefighter's spouse keeps only 50% of the retiree's benefits, unlike a private sector retiree's spouse who keeps 100%.
Firefighters are at Much Greater Risk for many Cancers
A study conducted by the National Institute of Occupational Safety and Health (NIOSH) on mortality and cancer incidence in career firefighters shows an elevated risk of several types of cancer - and of all cancers combined - compared to the general U.S. population.
Firefighters are at much greater risk than the general population for cancer: Type, Increased risk * Testicular cancer 102% * Multiple myeloma 53% * Non-Hodgkin lymphoma 51% * Skin cancer 39% * Brain cancer 32% * Prostate cancer 28% * Stomach cancer 22% * Colon cancer 21% (The Journal of Occupational and Environmental Medicine, 2010).
Again, despite an anti-worker group's claims to the contrary, Marin firefighters are exposed in the same ways as "big city" firefighters - often for longer durations due to Marin's inadequate firefighter staffing and weeks long wildfire responses, despite seeing a lower number of fires each year than some big city counterparts.
Retirement savings are paid by employee
Firefighter retirement benefits are not paid by the "taxpayers," cities, counties or state. While this may be a semantic distinction, it's important. Taxpayers (including firefighters) pay the same taxes you pay. And they earn their pay by working. Retirement benefits are a form of deferred compensation, paid by the employee funded retirement systems (typically CALPERS or a 1937 act Retirement Fund which are not government agencies). These funds come primarily from market growth and investment returns from a combination of employee and employer contributions made while the employee was working. Out of every dollar that funds a firefighter's pension and health insurance plan, 100% comes from the workers: this is because the "contributions" consist of money that employees chose, through negotiations, to take as deferred wages when they retire, rather than be paid immediately in cash. If they had not negotiated and signed contracts for improved retirement security, these dollars would likely have been paid up front as salary (which more arguably does come from "taxpayers," including the firefighters themselves).
Firefighters contribute a minimum of 8-16% of their salary towards retirement savings
Firefighters pay more into their retirement system than other public or private sector employees. In Marin, firefighters pay up to 18% of their salary towards retirement. By saving more towards retirement, they earn more once retired - no different than a 401K in the private sector. Using any one of dozens of online retirement calculators show that a private sector earner needs to invest about this amount of their monthly income to earn a similar retirement age and benefit as a firefighter. Yes, a legal secretary can retire at age 55 with 90% of their pre-retirement income if they invest 15-20% of their income in a retirement account for 30 years. Firefighters believe all Americans should have the benefit of guaranteed retirement income - the one thing a private sector earner is not insulated from are market crashes like 2008, caused by Wall Street excesses and their cronies in elected office.
How old is "Too Old" to rush into burning buildings?
Like the rest of the population, aging firefighters are at significantly higher risk of injury and illness - it is a young person's profession. Due to the extremely strenuous nature of the job (with little or no "warm up time,") firefighters suffer higher rates of disabling occupational injury. The older the firefighter, the more likely these injuries become, and recovery times (and cost) increase. These injuries are expensive to taxpayers and firefighters, decreasing the quality of life and requiring expensive treatment, overtime pay to replace the injured worker which stresses already low staffing levels. Relatively low minimum retirement ages are a recognition of these factors above all else (much more so than the more widely reported life expectancy issue).
New firefighter retirement age: 57
It's a myth that all firefighters retire at 50 with 90% of their salary. The minimum retirement age for all new firefighters in Marin is 57. While some Marin firefighters hired earlier are allowed to retire at age 55 (and a few at 50), few have the 30 years of service required to see this now defunct benefit. Firefighters hired before the enactment of PEPRA would have had to start working at age 20 and work 30 years by age 50. The average age of new firefighters in Marin is 27. Most firefighters nationally start their careers between age 25-29, and this is increasing as education and training requirements increase. Since the majority of veteran firefighters in Marin pay into an age 55 retirement plan, they would need 37.5 years of service at age 50 to earn 90 percent and would have had to start working at age 12 if the claims made by anti-worker groups were true.
Firefighters gave up pay and benefits to negotiate better retirements
When firefighters negotiated for enhanced retirement benefits (in recognition of the above factors) other potential benefits or salary enhancements are given up. This is the nature of collective bargaining. The cost to a city or municipality is no higher than if a comparable salary increase were negotiated in place of retirement benefits.
A dangerous, physically and technically demanding career
Firefighter jobs have become significantly more complex and technical over the past 30 years, with the additional responsibilities and training for Hazardous Materials Response, Emergency Medical Services, Homeland Security, Fire Prevention, Public Education and more. In return for providing more and better services to the community, firefighters negotiated for improved benefits and salaries, though their compensation has not risen as fast as other technical or dangerous jobs in the private sector.
As pay goes up, so does retirement savings
Young workers always pay more into the retirement system than current retirees did, ensuring the long-term viability of the public defined benefit retirement systems. Firefighter salaries have risen over the decades commensurate with increased skills and responsibilities. As salaries rise, so does retirement savings paid into the retirement system from firefighter paychecks.
Retirement system investments historically earn more than the Stock Market
In September 2008, at the beginning of the 2008-2009 market decline, MCERA's fund stood at $1.26 billion. By February 2009, the fund value dropped by $275 million. As of 2015, the fund had grown to $2.06 billion, recovering from the market loss and GAINING $800 million in additional investment returns.
CalPERS Investments outperformed Its 7.5 Percent target 13 out of the last 20 Fiscal Years. The CalPERS fund continues to grow, earning more than $70 billion in investment returns since the financial crisis began. CalPERS recently reported a 12.5 percent return on investments for the one-year period ending December 31, 2010, well above its 7.75% assumed rate of return needed to pay long-term pensions. Source: MCERA, CALPERS
CalPERS (Public Employees retirement System) and MCERA (Marin County Employees Retirement Association) have billions of dollars of assets from employee and employer contributions and outstanding market growth from investment during the "boom years." PERS is the single largest investor in the stock market, and their investments have beaten the market even during the recent economic downturn.
When an employer (a city, county or district) pays "catch up" arrears to the retirement system, it is reported widely in the media because of the short-term spike in cost to a municipality's budget. This occurs when investments return less than actuarial predicted. What is NOT reported is that during economic upswings (most of the past 15 years) employers often paid NOTHING into the retirement system, because investment returns exceeded expectations.
CalPERS TOTAL FUND NET RATE OF RETURNS
- 3 years for period ended 6/30/2015 10.9%
- 5 years for period ended 6/30/2015 10.7%
- 10 years for period ended 6/30/2015 6.2%
- 20 years for period ended 6/30/2015 7.8%
How do firefighter salaries compare?
Most firefighter salaries in Marin are low by Bay Area standards. For example, Marin County Fire Department pays its line personnel nearly a total compensation package that was up to 40% less than other similar sized county fire departments the Bay area, despite the fact that cost of living in Marin is higher. Firefighters are among the most technically skilled professions in Government. Paramedicine, hazardous materials response, technical rescue, and firefighting require a high degree of education with no margin for error. All firefighters are educated in each of these areas, and most have additional specialties.
Firefighters routinely use their education and skills to make split second decisions, under extreme stress, with the potential to cost (or prevent) millions (or billions) of dollars in damage to our communities. Their decisions and skills save human lives and the environment every day in our communities.
Entrance into the profession is extremely competitive. Firefighter salaries are fair and generous, yet they are paid considerably less than comparably skilled workers in the private sector, tech, or finance.
Can a Firefighter Qualify for a Mortgage?
Few firefighters are able to afford to live in Marin or other affluent bay area communities were they work. Of the 387 active professional firefighters in Marin, 274 live outside of the county (2010). While local governments claim that their priority is to have firefighters live close by for disaster preparedness, firefighters often must commute 2-3 hours (or more) to work due to the high cost of homeownership. Like all workers, when firefighters earn more, they more often choose to live closer to their work. In the early 2000s housing prices soared, firefighters faced with an inability to buy homes in Marin paradoxically gave up pay in exchange for a schedule arrangement that reduces the number of commute days while still working 56 hours per week. This effort helped firefighters to afford homes, unfortunately often in distant communities.
Don't be confused by anti-worker groups who say Marin firefighters earn more than the median income for Marin. This is true! But it's not relevant to the cost of living in the Bay Area or Marin. There are many reasons why Marin residents can afford to live here - some bought their homes before the housing market soared, half earn more (often MUCH more) than the median income, some inherit their wealth - and like many Marin firefighters who do live in Marin - some rent, live with parents, or have other often creative options.
As firefighters, we know it improves public safety when we have the ability to choose to live closer to where we work. To afford the median home in Marin (10/2015), a family must earn $230,000 per year. As rent and home prices soar, we see Marin hemorrhaging the few firefighters who once were able to live here.
Salary VS Cost of Living
The average firefighter salary is not enough to qualify to purchase even below median priced homes in Marin, but is too high to qualify for housing subsidies that are supposed to encourage firefighters to live in Marin in case of local or regional disasters.
Overtime is Work
Firefighters in California tend to make up for their relatively low hourly wages by working overtime in addition to their already long work-week. It is almost always cheaper for employers to hire back off-duty firefighters on overtime than hiring additional personnel. During the summer months firefighters are doing the risky business of wildland firefighting, often gone from their families, working 12-24 hour shifts on the fireline without rest. Overtime for fighting fires outside of the county is reimbursed to the cities, including administrative and overhead fees, in such a way that there is NO COST to the cities and towns for this common overtime pay. Like many private sector employees, many firefighters depend on this extra work to help make ends meet.
Dangerously Low Staffing Levels
Fire engines in Marin are dangerously understaffed, with most agencies choosing to forego the additional cost of staffing their department would need to meet the minimum standards outlined by the National Fire Protection Association - at a great cost in safety to the community and firefighters. While most Marin fire engines have only two firefighters, the NFPA recommends a minimum of four - studies show that four firefighters are required to perform the most basic firefighting tasks. A minimum of four firefighters is required by OSHA before interior structure firefighting can occur. This means you need two fire engines to arrive at your home before firefighters can even begin the dangerous process of attacking the fire.
Firefighters have accepted pay and benefits cuts during the economic downturn. Salaries have been cut, retirements have been "rolled back," second tiers added, and benefits reduced in order to help local governments and municipalities balance budgets.
Firefighters Pay Taxes
Firefighters are citizens and taxpayers who understand more than most the benefit of contributing to their communities. Firefighters have sworn a commitment to protect our communities, our assets, and our local economy from the effects of fire, natural and man-made disasters, and other costly emergencies.
Dispelling other myths and misconceptions about public employee retirement:
FACT: The recent economic crisis and Great Recession were driven by Wall Street excesses and corporate abuses, not factory workers, teachers, firefighters or police officers. This crisis is the real threat to retirement security for ALL Californians.
FACT: Cutting retirement for public employees did nothing to solve California's recent budget problems. Small budget decreases would be seen in 16-18 years for benefit cuts enacted today.
FACT: Opportunistic politicians used the national economic crisis to blame teachers, police, nurses, and firefighters for the nation's economic problems rather than putting responsibility where it belongs - on politicians, Wall Street, and the impact of corporate excesses on stock market performance. Wall Street was bailed out. The working class, including public employees, paid for their mistakes and largess.
FACT: The average public employee retirement benefit in California is $24,000 a year. 75% of all current retirees earn less than $30,000 a year. It is true that firefighters who retire today (or in coming years) will likely see more than this in their retirement - they earned more while working, they paid more into the system, and they negotiated for more retirement security rather than cash up front.
FACT: The majority of high pensions ($100,000+) are received by top level management - not ordinary working folks like line firefighters, police officers, nurses or teachers.
FACT: Artificially inflated retirement payouts ("Pension Spiking") are absolutely opposed by firefighter labor unions. They are wrong to associate everyone with the immoral excesses by a few. Ordinary working people should not be punished for the excesses of a few.
FACT: MCERA has bounced back and recovered the market losses. The fund was down to $1.25 billion in 2008, and is now $2.06 billion (2015) through market recovery, member contributions, and growth.
No information contained in this article or this website may be reprinted without permission or linked without attribution. The proper link for attribution is: "Marin Professional Firefighters, http://www.iaff1775.org/the-truth-about-firefighter-retirement-and-pensions"