Memphis pension reform

Memphis Council Approves Hybrid Pension Plan; Changes Will Affect Many Current Workers

After several meetings worth of debate, the Memphis City Council passed major changes to the city’s pension system on Tuesday – and the changes won’t just affect new hires.

Details of the new hybrid plan, reported by Fox Memphis:

Council passed a hybrid plan that was backed by Councilwoman Wanda Halbert that grandfathers in current employees with 7.5 years of experience, effective July 1, 2016.

This plan was introduced by Councilwoman Halbert, who drew harsh criticism from the crowd despite that her plan was approved.

So what does it mean? New hires and city employees with less than 7.5 years on the job will switch over to a new pension system. It mixes a retirement account with a defined contributions plan. Her plan only introduced two weeks ago after Councilman Myron Lowery introduced his plan that would only apply to new hires.

City employees in the crown expressed their anger over the changes. From Fox Memphis:

Members in the audience, many of them city employees, agreed with Councilman Lowery and blasted Councilwoman Halbert saying she had betrayed the city.

[…]

“This was an embarrassment to the City of Memphis that they make decisions that are that callous with that little bit of research on he table,” ,” said Kathy Hurley of Memphis. “If you just watch the film and see what all went on it’s obvious the right hand doesn’t know what the left hand it doing. It’s sad.”

Labor groups will likely sue over the changes.

Memphis City Council To Vote on Competing Pension Reform Measures

After postponing a vote earlier this month, the Memphis City Council will vote on two competing pension reform measures at their last meeting of the year Tuesday.

Memphis Mayor A.C. Wharton Jr. drew up one of the measures; an alternative to that measure is being proposed by a council member.

Details of the measures from Memphis Daily News:

Memphis Mayor A C Wharton Jr.’s proposal [would] switch all new city hires in 2016 as well as city employees with less than 10 years of service to a hybrid pension plan that mixes a market-based retirement account with a defined contributions plan. City employees with 10 years or more of service would remain vested in the city’s existing private contributions plans.

An alternative by council member Myron Lowery to only include new hires in the change to the hybrid plan was amended two weeks ago, but no final vote was taken on the new alternative put forth by council member Wanda Halbert.

Halbert’s plan would include new hires in the switch to the hybrid plan as well as city employees with less than 7 1/2 years of service.

She made the proposal after saying city employees should be expected to make sacrifices toward making the liability sustainable for the city. Her proposal is based on detailed discussions with Segal Consulting, the Atlanta actuary hired by the council earlier this year to advise it. She also used numbers from PricewaterhouseCoopers, the actuary firm used by the Wharton administration.

[…]

Council members in the last month have been discussing whether the city should keep contributions unvested city employees made under the existing plan if they move to the hybrid. Some on the council have advocated a “sweep” of those contributions into a fund that would be available to unvested city employees when they retire.

Halbert’s plan to include those with less than 7 1/2 years of service in the switch had eight votes on the 13-member council two weeks ago. But a final vote was delayed.

Tuesday’s meeting is the last time the Council will meet until 2015.

Memphis Weighs Two Pension Reform Measures

The Memphis City Council meets two times in December, and at one of those meetings they are expected to vote on the two pension reform measures that sit before them.

Details on the reform measures, from Memphis Daily News:

One version is Memphis Mayor A C Wharton Jr.’s proposal that would move new city employees and those with less than 10 years of service to a separate retirement account that equals the unvested employees’ contributions in the existing pension plan plus a multiplier.

The second version, by council member Myron Lowery, would move new city employees only to a pension plan that is the “hybrid” plan Wharton proposed in October for new hires as well as unvested city employees. The hybrid is a combination of a cash balance plan and a defined contributions plan.

The motive behind the reform measures is simple: the city is looking to save money. In particular, it is looking to cut down on its actuarially required contribution, the annual payment it pays to the pension system. From Memphis Daily News:

The city’s target in the new plan is how it affects the city’s annual required contribution toward the pension liability. Joyner estimated that by applying a new pension plan to new hires only, the city saves an average of $2 million a year over 25 years.

There would be more savings on the ARC, as it is called, if the city includes unvested employees with five years or service or up to the 10-year mark, as Wharton has proposed.

“You would have additional savings, but that savings will all be generated by taking benefits from people who are not yet vested in those benefits,” Joyner said.

City Finance Director Brian Collins said the administration is sticking by its recommendation of including unvested city employees as well as new hires.

“If you just stuck with the mayor’s plan, that’s where you get the most savings of $10 million,” he said. “If you just looked at it with five years, it is closer to $3 million or $4 million a year off the status quo ARC.”

The council will hear final readings of the two reform measures during their December 2 meeting.