Council OKs revamped retirement plan for future city employees

The Council voted Thursday to change retirement benefits for future city employees. If approved by the Legislature next year, the new package would come with a raised retirement age and a longer service requirement for retirees who begin working for the city in 2012 or later.

 

Currently, city employees can retire at age 55 with 20 years of service, at age 62 with 5 years of service, or anytime after they’ve compiled 23 years of service. The new rules call for retirement at age 62 with 30 years or service or at age 65 with five years under city employ.

 

Council action, which was unanimous, came over the objections of the local chapter of the American Federation of State, County and Municipal Employees. That group’s business manager, Greg Powell, submitted a substitute plan the night before the Council hearing which called for the city to maintain its current age restrictions, but increased the amount of service time that would be required at 55.

 

The city’s Deputy Chief Financial Officer Jeff Knodel argued that the changes would help make the Employee Retirement System solvent in a shorter amount of time when compared with the union’s proposal. “One of the goals that we’re trying to maintain is this minimum 80 percent (funded ratio) level,” he said. “Under the proposal that staff’s brought forward, the 80 percent funding would be obtained in 2032. The 100 percent funding would be obtained in 2040.”

 

Not so, he argued, for the union’s plan. “The 80 percent level…would be obtained in 2047,” Knodel said of the union proposal. “The 100 percent funded ratio…(would be) greater than 2060.”

 

A funded ratio, according to Knodel, is “a ratio of plan assets compared to plan liabilities.” He told the Council that “most pension experts recommend a level of 80 percent or above.” Currently, the city’s pension is at 71.8 percent.

 

Knodel said that, as an added bonus, fund solvency would bring back cost of living raises for retirees. Should that happen, it would mark the first time since 2002 that city retirees have had that benefit.

 

Council members seemed eager to help Knodel make his case in that regard. “At what point would it be reasonable for the (system) board and the Council to consider a cost of living adjustment?” asked Council Member Bill Spelman.

 

“Minimally, just from a benchmark standpoint, we certainly would need to be at an acceptable amortization period,” responded Knodel. “We’re talking 30 years from an amortization period.”

 

The city’s current amortization is stuck at infinity—meaning that, based on today’s figures, the city could never pay its full pension obligations. With the new plan, Knodel hopes to have that number down to 30 years by 2012.

 

After the hearing, Powell told In Fact Daily that, despite the outcome, the union didn’t feel abandoned by the Council. “It’s a difficult situation,” he said.

 

“I think that the major point we were trying to make with the City Council is just to be very cautious. We’ve seen this happen over the last 20 years, and once that erosion starts, it’s very difficult to stop it so we just wanted to make sure they were real deliberative in what they were doing.”

 

Powell was pleased that the new system would not affect current employees, and that the cost of living increases that might come from it were sorely needed. “There’s always trade-offs in these things,” he said. “I think they made a decent decision.”

 

He added that he didn’t think the union would oppose the changes when they come before the state legislature.

 

The proposed retirement changes will now go through the city’s office of Intergovernmental Relations. From there it will travel to the Capitol, where the Legislature will have to issue its approval. For that, Knodel wouldn’t forecast a result.

 

“I don’t know that (that) will be (a hurdle),” he said. “(But) you can never anticipate anything.”

 

Knodel stressed that the fact that the city had worked closely with the board that runs its retirement system could be a mark in favor of the bill. “We’ve worked with the (Employee Retirement System) board on this…it’s been a real collaborative process,” he said. “(This) will greatly improve our chances of having it passed.”