Pension changes lead more East Grand Forks cops to retire

After more than 20 years with the East Grand Forks Police Department, Michelle Manias retired from the force sooner than she had originally planned.

She said it was due to changes in a Minnesota retirement fund she had been investing in throughout her career. “I had to go now or miss out.”

Rule changes to the Police and Fire Fund within the Public Employment Retirement Association of Minnesota have prompted higher-than-usual retirements of police officers and firefighters across the state, leading some agencies to be unusually understaffed and scrambling to fill vacancies.

It’s a situation all too familiar at the East Grand Forks Police Department.

There are currently two unfilled positions at the department, with another to open at the end of July, said Police Chief Mike Hedlund. With time constraints associated with the hiring process, he said the department won’t be at full-staff until at least the end of the year.

“We’re small enough that if we’re missing a few people it creates problems,” he said. “From start to finish you’re looking at eight months before that person is eligible and on the roster. It’s a lengthy and difficult process.”

Hedlund said staff shortages at smaller agencies aren’t uncommon from year-to-year. Full staffing at the department is at 22 people, with 19 currently staffed he said.

“(The pension rule changes) has a negative impact on us because we lost (Manias),” he said. “But if you don’t lose 10 percent of your staff in a year, that’s unusual.”

Salaries for officers at the department range from $44,603 to $70,892, depending on the rank and time served, Hedlund said.

The salary of those enrolled in the pension affects how much of a contribution they make to the fund, which has increased due to a rule change in the PERA retirement plan.

More early retirees

In Minnesota, safety department officials can retire as early as age 50 - five years before their anticipated retirement age. Under the new pension rule, which went into effect July 1, officers who retire before 55 will have to pay a greater penalty.

Because of this, Manias made the decision forego her anticipated retirement age of 53 and retire early to avoid some of the penalties.

“I was never planning to retire at 55 - the changes had everything to do with (my retirement),” she said.  “If you leave at 50 like I did, you were only penalized 6 percent (over the next five years) for leaving early.”

Currently, officers and firefighters who retire early pay a 1.2 percent penalty for each year before they reach age 55. That penalty will be gradually increased to 5 percent per year over a five-year period, according to Mary Vanek, executive director for PERA.

Within that five-year period, the new rule could cost officers who retire at 50 as much as 15 to 20 percent of their pension until they reach 55.

“A lot more people are retiring at age 50 than we expected, so it’s costing (PERA) a lot more,” Vanek said.

She said between July 1, 2013, and June 1, 2014, roughly 580 retirements have been filed by members of the pension fund. She added the first half of 2014 saw a boost in the amount of retirement applicants.

Created in 1959, the Police and Fire Fund eventually grew to a significant size, prompting a majority of members of the pension to ask for the costs to be reduced, Vanek said. Since then, the fund took a dip and is below the “100 percent” mark, which has led to current actions.

“The changes are not good for anyone who was close to retiring,” Manias said. “I especially feel bad for people who are like 47 who were planning to retire at 50, and now have to wait until they are 55.”

Weighing options

For some, like East Grand Forks police dispatcher Mike Swang, the decision to retire at the end of July was not greatly influenced by the pension rule changes.

“Now was a good time to do it,” said Swang, who has worked for the city since 1988.

But for others the rule changes come as a problem and are causing headaches.

Patrol Sergeant Mike Anderson has been with the department going on 25 years and has been making retirement plans for quite awhile now.

“The first 10 years of your career you don’t think about retirement,” he said. “But then you watch how far guys go to max out their retirement and you start working the numbers to figure out your retirement number.”

Taking the new pension penalty fees into consideration, Anderson figures he has to work until he’s 54 to make up for the funds he’d lose if he were to retire around September when he turns 50.

“There’s always a thought of what is going to happen down the road,” he said. “I’m one of many in Minnesota who will hit the early retirement age soon and have to make a decision.”