Fire union president Paul Stackhouse (in green sweater) went over the contract details with city officials on Friday morning. (Connell Smith/CBC)

The City of Saint John has a new pension model for its employees.

The municipality and its four unions, representing police, firefighters, inside and outside workers, all signed a memorandum of understanding on Friday morning to switch to a shared-risk pension plan.

The ceremony at the mayor's office followed late night negotiations in Fredericton with a provincial mediator related to issues involving long-term disability.

Council had previously voted to pay 100 per cent of the long-term disability costs for ill and injured workers for the next two years at an emergency meeting held on Thursday afternoon

Long-term disability is not covered under the new shared-risk model.

The city’s budget process had been stalled until councillors could determine how they would provide long-term disability coverage to 54 workers, who are currently out of work and receiving those benefits.

Mayor Mel Norton says the deal averts a financial crisis.

"We would have triggered multi-million dollar pension payments. We would have eliminated all of the spending that's now going to be able to go into roads or recreation. We would have to do further budget cuts, I would say, across departments."

Under the new shared-risk model, the city and its workers will share the risk for future deficits. It also opens the option to temporarily reduce benefits if the fund falls behind.

The media and the public were not made aware of the emergency council meeting Thursday, where a number of resolutions, including coverage of 100 per cent of the costs of the disability plan for the next 24 months, were adopted.

Coverage of long-term disability benefits was said to be the final sticking point before moving ahead with a shared-risk pension model.

The city's four unions — International Association of Firefighters Local 771, the Saint John Police Association, the Canadian Union of Public Employees Local 18 and the Canadian Union of Public Employees Local 486 — all signed on.

Saint John councillors had spent hours debating how they would move forward with the pension reform package this week.

Without a vote, it had appeared the city would be unable to pass its 2013 budget before the end of 2012.

Saint John politicians voted in December to adopt a new shared-risk pension plan, similar to the scheme approved by the provincial government.

The shared-risk pension plan will mean Saint John politicians must find at least $12 million every year to pay down the pension fund deficit, which now stands at $161 million.

The city’s pension deficit under the old system had been estimated at $195 million.