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Firefighters demand city pay $1 million

The News Tribune has learned that the Duluth firefighters union filed six grievances against the city in November, including one that claims the city illegally transferred $1 million out of the Group Health Fund to the Irrevocable Trust Fund, whi...

The News Tribune has learned that the Duluth firefighters union filed six grievances against the city in November, including one that claims the city illegally transferred $1 million out of the Group Health Fund to the Irrevocable Trust Fund, which is used to pay down the retiree health-care liability.

Erik Simonson, president of the firefighters union, said after the transfer was made, health premiums for all city employees shot up. In addition to paying higher premiums under a contract signed last year, Simonson argues, employees have to pay an additional 1.5 percent on their premiums to replenish the money removed from the Group Health Fund.

"The employees are, in a sense, repaying the million that was transferred out of the fund," he said. "This violates the labor agreement."

Simonson wants the $1 million to be put back into the Group Health Care Fund. Though he acknowledges the grievance is bad timing as the city faces a massive retiree health-care liability, he doesn't believe current employees should be punished for the city's financial woes.

"The contract requires the city to cover the entire cost of retiree health care," Simonson argues. "It's not up to active employees to supplement the cost of retiree health care, and in a sense that's what we're doing."

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Though the grievance arbitration isn't scheduled until summer, if the city loses the case it could be another blow to its already struggling finances. City Finance Manager Genie Stark said that a worst-case scenario requiring the city to repay $1 million immediately to the trust fund "would probably be the equivalent of about 16 to 17 people going home."

The city agreed in 1983 to provide health care to retirees at no cost but for decades didn't set aside money to cover the maximum amount it could owe. Federal accounting rules adopted in recent years require that governmental bodies set aside money to cover potential liabilities. According to the most-recent estimates, potential claims by retirees totaled $267 million in 2007 and are projected to reach $277 million by 2014.

The city has taken several steps since 2005 to reduce the liability: moving all employees to a single health plan and a new drug co-pay plan, changing new employees from a defined benefit plan to a defined-contribution plan, and establishing an irrevocable trust fund that is expected to earn a higher rate of interest over time.

While the firefighters are the only city union to file a grievance over the Group Health Fund transfer, Sgt. Jon Haataja, president of the Duluth Police Department union, said the firefighters do have other unions' support.

"We understand the reasons behind it and we're in support of them," he said. "We hope that this can be resolved suitably."

Duluth Chief Administrative Officer John Hall said the city will fight the firefighters' grievance and that he doesn't believe they have a legitimate claim. However, Hall said, data practice laws prevented him from commenting further.

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