A Tribute to Retired Pension Commissioner Sam Diannitto

December 31, 2017

You may know that Sam Diannitto served as a pension commissioner for 42 years – 25 as the active fire elected member and 17 as the retired fire elected member. But I bet you didn’t know he was responsible for putting millions of dollars back into the pockets of retirees. Or saving active members hundreds of thousands of dollars in additional income taxes. Sam was the one who did the heavy lifting on these and numerous other issues during his tenure.

Multi-Million Dollar Reimbursements
In the mid-1980’s, the Fed began charging a fee for Medicare Part B benefits. In response, UFLAC asked the City Council to reimburse members who were being charged the fee. We argued that members had no choice and were required to sign up for Medicare. And in turn, because Medicare became the primary provider, the City’s costs in subsidy payments were reduced. We figured that it was only fair that the City share these savings with the members.

Sam Diannitto

The Council eventually approved a reimbursement plan for all City employees – except for retired sworn members! They passed the buck to the Fire & Police Pension Board, saying only the Pension Board had the power to approve sworn employee benefits.

When the reimbursement plan was finally presented, the Pension Board president, a mayoral appointee, immediately challenged the Board to permanently table the matter. He felt that sworn members already received an “excessive level of benefits.”

But before a motion to table could be made, Sam jumped in and asked if anyone on the City Council had raised an objection to granting this benefit to sworn retirees. Of course the answer was “No,” being that the Council had already approve the benefit for everyone else. Sam then quickly moved to grant the reimbursement benefit. The Board president was caught flatfooted and Sam’s motion was approved 6 to 1.

Sam’s quick action saved the day and ensured approval of this benefit. As to its value, eligible retired members will be reimbursed $12.5 million next year alone.

Huge Tax Hike Averted
For many years, unlike public pension plans such as our Fire & Police plan, private sector pension plans were required to conform to Tax Code Section 415. Under Section 415, large transfers of monies to pension funds that were made to avoid paying income taxes were disallowed. The code also forbid “excess benefits” and set a maximum pension amount that could be paid at the “normal retirement age” of 62.

For years, rich professionals complained bitterly to Congress that these provisions were unfair because public pension plans were not subject to Section 415. They hoped that this argument would result in the repeal of Section 415.

They finally got Congress to agreed that private and public pension plans were not treated equally. But instead of repealing these provisions, Congress announced the tax code would be changed so that public pension plans would also fall under Section 415.

Needless to say, this caused great concern for public pension plans, especially Fire & Police plans. Unfortunately, no one from the public sector seemed to know what to do.

Recognizing that a potential disaster was at hand, Sam called me and said we needed to talk to the U.S. Treasury Department to mitigate the effects of Congress’ announcement. Sam had been the president of the National Conference on Public Employee Retirement Systems, the largest advocate for public pension plans in Washington, D.C., and had previously worked with many staffers at Treasury. These were the same people who had been tasked by Congress to write the new working rules for public pension plans.

Sam set up a meeting where we explained that firefighter and police benefit structures were completely different from other employees: age 62 was way beyond our “normal retirement age;” survivor (IOD) and disability pensioners were granted pensions totally independent of age; and we already had members (many fire and police chiefs) who had vested rights to pension amounts that exceeded the 415 limits.

In our meeting we were told that they were totally unaware of these types of issues. Then they actually asked us if we had any solutions! We proposed different age and pension amount criteria for firefighters and police officers; exemptions from the 415 limitations for disability and surviving spouse (IOD) pensions (We argued these should be exempted because they fell under Tax Code Section 104 provisions.); and language that would create “excess benefit” plans.

Weeks later we were informed that we got everything we asked for. The new 415 rules would create special “carve out” provisions for fire and police. The normal retirement age would not be 62 and the pension amount limitations would be raised for “early” retirement. The new rules established that disability and survivor (IOD) pensions would be exempt from 415 limits. And finally, provisions were adopted to allow for the creation of “excess benefit plans”. All of these provisions were subsequently approved by Congress and are still in effect.

Had it not been for Sam, these “carve outs’” would never have existed. Had that been the case, each year every active member would be paying income tax on the City’s contribution to the plan. In 1986, for example, the average member made $43,750. The City’s contribution rate was 46.52%. That would have resulted in the average member owing taxes on an additional $20,350. Using an estimated 33% combined tax rate, this would have cost the average member an additional $6,716 in taxes. Assuming the average member worked an additional 15 years, we can clearly see that Sam’s efforts saved those members well over a $100,000 in additional income tax.

So, the next time you look at your pension check receipt, or your bank statement, remember what Sam Diannitto has meant to your financial welfare, and offer a thank you to a very special individual who will be truly missed.

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