The fund since September has decreased about $5.7 million, from $23.7 million to about $18 million, said City Clerk Alan Atkinson, who serves as its secretary. Those losses are due to the financial markets, as a large part of the money is invested in the stock market.
Chad Little, the fund's actuary, met with police officers and firefighters Wednesday and Thursday to explain the situation and give some options on how to fix it.
In Anniston's plan, which is set out in state law, both benefits and contributions are defined. That means that neither the amounts put in by employees and the city nor the benefits paid to retirees fluctuate based on the market. That situation is OK in good market years, Little said, but problematic in bad years.
"You have to hope that magically what's going in will balance with what's going out," Little said. "And it hasn't, it never has."
Little said it's "very, very rare" to have both the benefits and contributions defined.
Atkinson said the fund is paying out in benefits more than $1 million a year what it's taking in as contributions.
Little said because it takes much more time to make up money lost in the market, the problem is compounded.
The options he suggested to police and fire employees included larger contribution rates from Anniston and/or employees. Currently employees pay in 10 percent of their paycheck and the city matches that amount.
He also suggested decreasing benefit rates, but only for those employees yet to retire. Current retirees would not be affected.
Right now, an Anniston police officer or firefighter who retires with 30 years of service receives 90 percent of the average salary of his last three years. Fire and police department employees must retire at 60 under this pension plan. Participation in the plan is mandatory and those who leave can take out the money they have contributed, but no interest.
Anniston's police and fire employees also don't pay into Social Security, making the city's pension fund their sole source of retirement money.
Other city employees are under the Retirement Systems of Alabama. Finance director Danny McCullars said it would be too costly to revert the police and fire pension plan to RSA right now, but it could be doable if the departments chose to phase out the plan.
That option was not discussed at Thursday's meeting with the actuary.
Fire Chief Bill Fincher and Police Chief John Dryden said everyone in their departments knows something must be done about the plan.
"We've just got to figure out what we can do that is the least painful solution for everyone involved," Dryden said.
The fund's Board of Trustees, made up of one representative from the fire department, one from the police department and one retiree, will work with Little to come up with a solution. Little said hasty action could be harmful, and advised waiting to see how fiscal year 2009 finishes in the markets.