An appeal of a recent court ruling could result in Mehlville Fire Protection District employees losing their retirement contributions for 2006, according to Board of Directors Chairman Aaron Hilmer.

Union employees’ request for a permanent injunction prohibiting the Board of Directors from changing the fire district’s pension plan to a defined-contribution plan from a defined-benefit plan was denied in August by St. Louis County Circuit Court Judge Thea A. Sherry.

Local 1889 of the International Association of Fire Fighters filed the lawsuit in March 2006, just days after the Board of Directors voted on March 16, 2006, to adopt an amendment and two resolutions changing the district’s pension plan from a defined-benefit plan to a defined-contribution plan. Sherry initially granted a temporary restraining order and later a preliminary injunction prohibiting the board from taking any action to change the pension plan.

Sherry’s Aug. 27 ruling dissolved the preliminary injunction and denied Local 1889’s request for a permanent injunction prohibiting changes to the pension plan.

Since then, the district has been moving forward with plans to implement the defined-contribution 401(a) plan, and the district’s actuary is calculating lump-sum benefit amounts for each plan participant. Employees can make additional contributions to a supplemental deferred-compensation pension plan. Both plans will be administered by the American United Life Insurance Co., or AUL.

Monthly benefits provided to current retirees will not be affected by the changes.

The district will contribute a percentage of an employee’s total compensation to the defined-contribution plan based on years of service. Employees with less than 15 years of service will receive 8 percent; 15 to 19 years, 9 percent; 20 to 24 years, 10 percent; and 25 or more years, 11 percent.

A Sept. 27 memorandum prepared by Hilmer and the district’s legal counsel, Mathew Hoffman, states, “Currently, calculations are being made with regard to the 401(a) contributions due each employee. The district, at this point, plans to contribute to the 401(a) plan of each employee before the end of the year, but after the accounts have been transferred to AUL. If the district is unable to make the contribution until 2008, employees may incur financial loss due to IRS (Internal Revenue Service) Code Section 415 which places yearly limits and restrictions on retirement-account allocations. Under IRS Code Section 415, the district cannot make contributions for 2006 as the deadline for payment was June 15, 2007.”

Some employees have asked about the potential for “financial loss.” Noting that Local 1889’s attorney, John Goffstein, has filed a motion for a new trial and a motion for an injunction pending appeal, Hoffman responded to employees, “… At the present time, it is uncertain whether this order will be appealed. However, a request for TRO (temporary restraining order) pending appeal has been filed with the St. Louis County Circuit Court. If granted, an injunction may limit the district from distributing funds pending a final determination on appeal.”

Hilmer said, “Back in June of 2006, we passed Amendment 6-06 … Even if the board doesn’t agree with the amount of retirement benefits that were given out before, we said by whatever means necessary we will make you whole as of 3/31/06. I thought that was a tremendous gesture on the part of the board and it could end up being a very expensive gesture. But we’re going to make them whole as of where they were at the end of March 2006.

“There was no obligation the board was under to make them whole — only pay them what was in the existing plan and that’s what the plan document said.”

In addition, Hilmer said he has proposed a retirement incentive open to 10 employees with 25 years or more of service. If 10 take the offer before the end of the year, the incentive will be reopened in the fourth quarter of 2008 to 10 more. The incentive includes a $15,000 bonus, $1,000 for each year of service and 19 percent of 2007 gross wages, which includes unused sick leave and unused vacation.

For all employees, Hilmer is proposing:

• To upgrade the Standard Insurance disability benefits.

• To revert trade time to how it was before once a higher court rules on the state’s new minimum-wage law.

• To set 2007 retirement contribution rates at 14 percent to 19 percent — based on years of service — since it is impossible to give a 2006 contribution because of IRS Code Section 415.

If an appeal is filed, some of the incentives will not be offered again, Hilmer emphasized.

“… Obviously, the board is not obliged to do anything, but I felt this made good sense for the district and for the employees, and I threw a few of these things out here — and obviously, like I said, if an appeal is filed, some of these will not be seen again,” he said. “First there is a retirement incentive. This could be for a longtime employee of 25 years or more as an incentive to move on or retire.

“But it’s good for the district, too, this is about a cost-neutral thing to the district after the first year. But I really want to point out, it’s good for the employee and it’s good for the district. It’s a win-win situation.”

Regarding the Standard Insurance disability, he said, “We would upgrade the Standard disability option to a higher level of payout. It’s been requested. Actually, I offered this to them in June of 2005. It would be about an extra $30,000 to the district. This would be the only one of my proposals that would actually cost the district more, but we were prepared to pay this two years ago.”

Of the trade time, Hilmer said, “I would love to revert back to how it was before. So once again, win for the district, win for the employee.

“And the last one, the one I feel is of utmost importance, due to IRS Rule 415 because of the litigation requested by the employees last year, we were unable to put money — to terminate the plan and start the new plan — but now the judge has given the go-ahead as of 3/31/06, it is impossible for us to put money in their 2006 plan … So what I would like to see happen is the board increase the ’07 rates to 14 percent to 19 percent so the employee is compensated for that based on years of service … I would like nothing more than to get all this money into the employees’ individual accounts before the end of the year. But the hour is late and we’re not the one filing the lawsuits.”

Asked if an appeal could jeopardize employees’ 2007 retirement contributions, Hilmer said, “That’s exactly what I’m saying. I want to borrow a quote from my predecessor, (former board Chairman) Tom O’Driscoll: ‘This sounds threatening to people. It’s not meant that way. It’s just simply informational. You can either listen to it and understand it and then accept it or reject it. And if you reject it, that’s your decision, but you’ve been informed about what will happen.’

“I cannot stress enough that I would love to do nothing more than to ask the board to go along with me on the things that I have proposed here to get the money in the employees’ accounts as soon as possible,” he added.