The Greater Memphis Chamber remains in favor of a switch to a defined contributions benefits plan for city employees, despite the report Memphis City Council members got last week from their actuary firm suggesting there is no hurry to implement such a change.
The Greater Memphis Chamber is in favor of a switch to a defined contributions benefits plan for city employees, despite a report suggesting there is no hurry for such a change.
(Daily News File Photo)
The chamber waded into the politically sensitive question of city employee benefits before the report from Segal Consulting of Atlanta.
The Segal report had much lower estimates of the city’s unfunded pension liability and the city’s annual required contribution toward that liability than those of Memphis Mayor A C Wharton Jr. and his administration.
The report, which is preliminary, also questioned whether the Wharton plan to switch to defined contributions – a 401(k)-type plan – for all newly hired city employees and city employees with fewer than 10 years of service would have any significant impact for the first five or even 10 years.
Segal Consulting also said the city might want to consider a table of plans that offer different options for different groups of city employees, including a specific plan for public safety employees.
Segal put the city’s unfunded pension liability at $457 million, not the $709 million estimate from Wharton and the city’s actuary consultants. Segal estimated the city’s annual required contribution toward that liability at $69.3 million, not the $100 million estimated by the administration.
“No one’s disputing that we have a pretty significant number regardless of what it is,” said Dexter Muller, interim president of the chamber.
Muller said the chamber has seen the Segal report but has not thoroughly analyzed its assumptions.
“It points out that a couple of assumptions if you change, you can have a big impact on the numbers. I’m not sure we’re completely comfortable with some of the assumptions they made,” he added. “Regardless of that, it doesn’t change our position because we’ve got a big hole to fill. It’s important for us to continue pushing for what we believe is the best plan going forward for the city and the citizenry.”
Segal’s experts said the city might consider a different mortality or life expectancy age that is three years shorter based on life expectancy tables for this region of the country. The age would go from 79 to 76.
With that three years difference, Segal estimates the city’s liability drops by $92.7 million.
“That’s a very big number. If you are going to use an assumption like that, I think you’ve just got to make sure you are on solid ground using it,” Muller said. “It might be helpful to get some others to take a look at it. That was a big shift. … Anything that influences that much, you should make sure you are on safe ground. I don’t know that that’s been fully vetted yet.”
Muller also said the report from the consulting firm the city council hired to specifically advise the council is healthy, along with the other reports from the administration and the municipal unions.
“It seems like that’s the way you ought to make a decision that is that important,” he said.