Can An Arbitration Award Eliminate Pension Contributions ?
In City of Butler v. Fraternal Order of Police, Lodge # 32, 780 A.2d 847, 855 (Pa. Cmwlth. 2001), the Court held an interest arbitration award that eliminated pension contributions went beyond the powers of the arbitration panel because it failed to adhere to Section 302 of Act 205, which requires a cost estimate before any modification of a pension plan.
Also, City of Erie v. International Association of Firefighters Local 293, 836 A.2d 1047, 1052 (Pa. Cmwlth. 2003), found the arbitration panel's award of a Deferred Retirement Option Program to be illegal when the record failed to contain a proper cost estimate demonstrating actuarial soundness consistent with Act 205. Lastly, this Court, in Northampton Township v. Northampton Township Police Benevolent Association, 885 A.2d 81, 83 (Pa. Cmwlth. 2005) (citing City of Erie v. Haas Memorial Lodge # 7, 811 A.2d 1071 (Pa. Cmwlth. 2002)), petition for allowance of appeal denied, 588 Pa. 753, 588 Pa. 753, 902 A.2d 1243 (2006), explicitly held "Act 111 awards modifying police pension plans must be made in compliance with Act 205."
Because the arbitration panel's three-percent cap on pension contributions did not have the benefit of a proper cost estimate report under Act 205, the Court held the panel exceeded its powers. Id. at 85.