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VOL. 129 | NO. 227 | Thursday, November 20, 2014

Wharton’s Hybrid Pension Falls in Council

By Bill Dries

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Memphis Mayor A C Wharton Jr.’s hybrid pension proposal, the second of two parts of his overhaul of city employee benefits, was voted down Tuesday, Nov. 18, by the Memphis City Council in a bid by some on the council to end “uncertainty” among city employees.

The council acted to eliminate Wharton’s hybrid pension proposal Tuesday on the second of three readings for the ordinance.

LOWERY

Meanwhile, the council approved on second reading an alternative by council member Myron Lowery that would include only new hires for the hybrid proposal.

That alternative advances to third and final reading in December.

Wharton proposed the hybrid pension plan last month. It includes a percentage of employee and city contributions to a market-based retirement plan as well as another percentage to a defined contributions plan for new hires and city employees with less than 10 years of service. Those employees with less than 10 years are “unvested” in the existing defined benefits city plan.

The hybrid plan was the latest change of course by Wharton in a vocal and emotional City Hall debate through the summer that also included council approval of health insurance benefit changes for city employees and retirees that take effect next year. Even after the council approved the changes in June, there were more adjustments to keep some groups of city employees and retirees covered for at least the first year.

The pension plan changes, in whatever form they take, will go into effect in 2016.

The council’s decision came a week ahead of a meeting with Segal Consulting of Atlanta, the actuary firm hired by the council to advise it independent of the administration. Segal will offer its review of Wharton’s hybrid proposal and Lowery’s alternative.

The council acted before that review to avoid some of the pitfalls of the summer drama over health insurance benefit changes.

Lowery acknowledged keeping unvested city employees in the current defined benefits pension plan will cost the city more. But he said his compromise was influenced by the summer of protests by city employees – mostly firefighters and police officers – as well as exits from both forces.

HARRIS

“I wanted to avoid some of the challenges and problems we had during the health care fight by making a compromise early on,” he said.

Council member Lee Harris cited the changes in health insurance terms even after the June council vote.

“We sort of, as a city government, have been scatterbrained,” he said. “We’ve been all over the place. … This is an opportunity to at least show some level of decisiveness.”

The council acted after also hearing earlier in the day that the city’s contributions to the existing pension plan for unvested city employees would not move with the employees’ contributions to the hybrid plan.

“Personally, I believe that is wrong,” said council member Harold Collins, who was one of the eight votes against the hybrid. “We are losing employees – first responders – at a fast pace. … They are not leaving because they are getting better jobs. They are leaving because of the instability.”

Some on the council voted against the hybrid plan with the understanding that if they hear something from Segal next week that changes their mind, they will move to reconsider the action at the first council meeting in December or amend Lowery’s ordinance on third reading.

City Chief Administrative Officer George Little said the administration stands behind its original proposal to include unvested city employees as well as new hires in the hybrid plan.

He cited the larger role the pension reforms play in combination with the health insurance changes in righting the city’s finances from unsustainable liabilities from both sets of benefits.

“Hear Segal out,” Little said. “Make your decision armed with full information.”

Council member Shea Flinn, meanwhile, said the differing plans were creating too much confusion.

“We need to clean it up one way,” he said. “We can’t have these multitudes. We have to start talking about what the plan is going to be.”

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