VOL. 129 | NO. 205 | Tuesday, October 21, 2014
Council Wades Into Pension Reform
By Bill Dries
For the second time in three weeks, Memphis Mayor A C Wharton Jr. has made major changes to the overall plan to right the city’s financial condition by changing employee and retiree benefits.
Memphis Mayor A C Wharton Jr. has changed his plan to overhaul the city’s pension system to include a hybrid system. Memphis City Council members review the new plan Tuesday, Oct. 21, but aren’t expected to vote on any proposal at the session.
(Daily News File/Andy Meek)
Late Friday, Oct. 17, Wharton proposed a “hybrid” retirement plan for employees that would allow new hires and those with less than 10 years on the job to enroll in a two-part plan that includes a professionally managed market-based fund as well as a 401(k)-like plan.
City employees currently have a defined benefit pension plan. Wharton proposed earlier this year a switch to a defined contribution plan similar to a 401(k) for all new hires and city employees with less than 10 years of service who are not vested.
Those with 10 years or more of service and retirees would not see their pension benefits change under either the original proposal or the new one Wharton unveiled Friday.
Unlike the changes Wharton made two weeks ago to the city’s overhaul of health insurance benefits, the pension changes would have to be approved by the Memphis City Council.
Council members are back to the charts and numbers Tuesday, Oct. 21, with their actuaries as they discuss coming council votes on pension reform measures including Wharton’s new proposal.
The executive session on the matter meets Tuesday at 1 p.m. to review what Segal Consulting of Atlanta, the actuary consulting firm hired by the council, has to say about pension reforms proposed by Wharton and what other options the council could take on changing pension benefits.
Wharton’s amended pension proposal would allow employees to contribute 2 percent of their salary to the market-based plan with the city contributing between 3 percent and 16 percent of salary depending on the employee’s position and years on the job. An employee could contribute another 6 percent to the 401a plan with the city contributing 1.5 percent of that employee’s salary.
Memphis Mayor A C Wharton Jr.’s amended pension proposal would allow employees to contribute 2 percent of their salary to the market-based plan with the city contributing between 3 percent and 16 percent of salary.
Employees can currently contribute 8 percent of their salary to the city’s pension plan with the city contributing 6 percent.
Meanwhile, council member Myron Lowery is floating a proposal that would apply the pension changes to new city employees only and not those unvested city employees now on the payroll.
The council meets at 3:30 p.m. at City Hall, 125 N. Main St. Follow the meeting and developments in committee sessions earlier in the day @tdnpols, www.twitter.com/tdnpols.
No votes are expected Tuesday on any of the three ordinances or two other ordinances up for third and final reading that would enact the original Wharton proposal to change city pensions.
Council Chairman Jim Strickland has said Tuesday’s executive session of two hours will involve the council as well as municipal union leaders weighing what is expected to be a lot of technical information and getting detailed questions answered between that session and final votes that could come at the earliest at council sessions in November.
The final votes are more likely in December if the council goes with the new Wharton plan because it is a substantial amendment that requires two more readings instead of one more.
The Wharton administration has indicated it can wait for a council decision on what is the second of two major changes to the benefits of city employees and retirees.
The council approved in June changes to the health insurance benefits of city employees and retirees and changed Wharton’s proposal by leaving 300 retirees and their spouses covered by the city’s health insurance.
Earlier this month, Wharton made another change that keeps another 1,200 working spouses on the city’s plan – both changes keep the city’s 70 percent subsidy of their health insurance premiums intact as well.
Savings from the broader health insurance changes also go toward an increase in the city’s annual funding of the pension liability.
The city’s experts and actuaries have said the unfunded liability of the health insurance and pension benefits are each unsustainable without changes to the current plans.
City retirees are contesting the change of the health insurance subsidy for the remaining retirees and employees in a pending Shelby County Chancery Court lawsuit. Chancellor Walter Evans is expected to rule this month on the retirees’ motion for a temporary restraining order to halt the changes in the health insurance benefits pending a full hearing and court decision on the matter.