Politics & Government

Danbury Moves Away from Traditional Pension Plans

When the City Council approves the Teamster contract and the municipal employees association contracts Tuesday, the new contracts will eliminate the existing pension plan for new hires after July 1. The Teamsters contract cut pensions last year.

Danbury is changing its pensions.

The city's Teamster Union agreed to take raises of 0 percent, 2.25 percent, 2.75 percent and 2.75 percent for the contract it radified through July 1, 2015. It also agreed to eliminate the General Employees Pension Plan for anyone hired after July 1, 2011.

The city's clerical union, the Danbury Municipal Employees Association, agreed to the same raises plus the elimination of the pension.

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The Danbury Fire Department rejected the contract.

"This isn't just Danbury. This is nationwide. It's worldwide," said Danbury Mayor Mark Boughton. "The defined benefit pensions were too costly."

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The two most common types of pensions are defined benefit plans, which guarantee a worker a set amount of money each year, and the 401(K) plans, which don't guarantee a return. With the 401(K) plan, the employer will donate money (depending on the year and economy) along with the worker. That money is invested in mutual funds or other financial investments, and the worker gets the return on the investment, if any, when they retire.

Rhode Island held a special legislative session for two months at the end of 2011 to tackle this problem, and it changed its state pension programs across the board. Nationwide the problem is referred to as the "Pension Deficit Disorder."

Boughton said the challenge is to balance the rising costs of pensions in the future with helping people who worked for the city for the last 25 years. Starting next year, the city will switch most of its new workers to 401 (K) plans. As the city's older workers retire or die, the city's contributions to the older pension plans will decrease.

"The defined benefit pension plan is gone," Boughton said.


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