(An updated version of this blog item appears in my column in tomorrow's Inquirer. Read it on this link. It shows the PHA plan isn't in such bad shape, which raises the question: Is this what's going to happen to Philadelphia's underfunded pension plan? Joe D.)
The Philadelphia Housing Authority and the Building and Construction Trades Council, which represents 344 members of the Laborers, Firemen & Oilers, Painters, and other trade unions who maintain and board PHA public housing projects and other city-owned rental houses for poor people, have signed what PHA calls a "historic" agreement that freezes PHA's traditional guaranteed pensions at current levels, and replaces them for future accruals with a new 401-k type, do-it-yourself, invest-at-your-own-risk retirement plan, starting in April.
"I normally shy away from these, in my world," union council president Patrick Gillespie told me when I expressed surprise he'd ever agree to give up guaranteed pensions.
But Gillespie said PHA's pension fund is in such bad shape, the unions saw no alternative. "It was necessitated by the financial condition of these funds," which are managed by PHA, not the unions. "They had a major hole, an $82 million hole." PHA agreed to help plug that hole by paying $8 million a year into the plan for the next 20 years, so it can keep paying current retirees and vested workers who will be retiring with benefits they earned under past agreements.
The deal "secures the future of our union employees," Michael P. Kelly, acting boss of PHA, said in a statement. Besides PHA's $8 million yearly subsidy to the old plan, PHA will match worker contributions of up to 5.5% of their pay into the new retirement plan.
Patrick Eiding, head of the Philadelphia AFL-CIO council, told my colleague Mark Fazlollah that PHA expects a similar deal from members of the AFSCME city workers' union, which represents around 70 PHA workers.
Council members get a signing bonus of $2080, a 50 cent hourly wage increase, and future increases totalling $2.15 an hour, under the new contract. They'll also start paying 4% of their healthcare premiums.