RI firefighter compounded COLA could set a costly example
The latest contract for city firefighters is held up in the City Council Finance Committee because some claim this will cripple the city’s pension system and allow unions to go after more costly benefits. The contract allows firefighters a 3 percent compounding cost-of-living adjustment (COLA). Compound interest is “new interest earned based on the total accrued amount rather than just the principal.” If the contract is approved, it could end up reversing all the progress made on pension reform, which prohibits compounding COLAs. The City Councilman chairman, John J. Igliozzi says, “This has a massive rippling effect not just affecting firefighters, but all contract negotiations and arbitrations. It sets the bar, putting the city in a difficult position where it almost has to give out compounded COLAs.” One fire chief, who retired in 1991 at a salary of $54,616, already receives a 6 percent compounded COLA and is one of the state’s top pensioners at $165,247. Even so, in another five years, his pension is expected to increase to $221,139.
Marcelo, P. (2010, July 21). Firefighters’ new contract held up over COLA flap. The Providence Journal.