Sunday, December 28, 2008

A recent history of the Council's action on town pension plans

During the campaign in the fall of 2005, one of my main goals was to move the town from offering "defined benefit pension plans" (DB) to "defined contribution pension plans" (DC). Having won reelection and not being as knowledgable (i.e. I was inexperienced) as I wish I had been at the time... no one gave me any guidance and I did not distinguish between union and non-union employees. So I took no action at the time and waited for the union contracts to move forward.

Fast forward to October 2006 and the union contracts started coming to the Council for votes. Back then I wrote:

The vote fell along party lines, although everyone seemed to have different reasons for why they voted for/against. My reason for opposing the contracts was that I simply feel that we should be moving from "defined benefit" plans and to "defined contribution" plans for all new union employees. However, I was the only person who cast his/her vote for that reason.

For background, the issue really was cost. To reach agreement on that particular contract, defined contributions would need to have been higher than if the contract maintained a defined benefit plan. That is, it was going to cost more to move from a DB to a DC. And though I was reluctant to spend more money, I was willing to do so... to move the uncertainty from the taxpayer to the employee.

To the best of my memory, there were two basic camps on this vote:

1) some felt the "20 year payback" * was too long and

2) some felt further negotiation could reduce the cost to taxpayers.

I simply felt that we needed to move from a DB to a DC, even if it cost more in the short run. Regardless, the Council decided to stay with the DB plan.

Fast forward to the Council meeting of June 24 2008 and I had come to recognize the difference between union and non-union employees and the ability to handle the two groups differently in terms of pension plans. So I requested the Personnel Committee to expeditiously consider** the need for the Town to continue offering DB plans to future non-union employees.

Then in November 2008, we got an update about an October 21 2008 Personnel Committee meeting:

The update was that we shouldn't hold our breath. And that this will be considered in conjunction with the 09/10 Town budget deliberations in March '09... only nine months after I suggested we eliminate DBs as an option for future non-union employees.

And for some additional explanation on how the Town's pensions work... over the past few months, I've been trying to offer information about the troubles facing the Town's DB plans - including my comments at the November 2008 Council meeting:

The actions taken by the Council over the past few years do have consequences. But since this post is already lengthy, I'll discuss them in a later post.

Tim White

* The actuarially defined period over which the DC plan would begin costing the taxpayers less than the DB plan
** I felt I was being generous by requesting the issue be considered by the end of the summer.

5 comments:

Anonymous said...

Tim,

This is great that you are trying to get some traction on this. This should be an absolute no brainer to have DC's for new employees.

I think your best bet is to demonstrate the risk and potential liability the town may have as the pension fund shrinks as well as couple it with stories that towns across the nation are facing the same issues.

Frugality is coming back; in a big way.

Best Regards,
Mike Ulicki
Cheshire

tim white said...

Thanks Mike. An already planned followup post should cover the risks / costs / benefits.

Anonymous said...

Pensions in the private sector have been going by the wayside.

It is time to face reality in the public sector.

It's ridiculous how people in the private sector retire at rates higher than their base rates.

Retirement after 20 years is a joke even if you were a cop, fireman or anything else. There is nothing in the private sector that compares.

Disability should be the requirement that the person perform another job and not get permanently paid at the same time that they get another similar job with either a another private or public entity.

You don't have to look at Detroit to see totally unrealistic pays and benefits.

Anonymous said...

DB vs DC - the town has never offered a fair comparitive plan for unions to consider negotaiting away thier pension plans. The town has also survived for years without having to make contributions to many of the town pension plans as they were/are still overfunded based on thier liability. The economy is bad now, and everyone wants to take out of the public sector employee pocket. When the economy was booming (and will rebound) is anyone advocating the public sector employee be "rewarded".
"Retirement after 20 years is a joke even if you were a cop, fireman or anything else" - most firemen/police do not retire and count thier money, they have to get another job and start a new career, it is because of the rigors (physical and mental) that most leave after 20. How many 55-60 year olds can lug 100 lbs of firehose up flights of stairs, or wrestle a 25 year old crackhead to the ground.

Anonymous said...

Thinking about 631 pm - - Lugging fire hoses at least in this town is a job of some really wonderful dedicated volunteers. Hope we are able to keep this vital service a volunteer thing. Look at the troubles cities like Waterbury have with their FT fire fighters union and city management. Too many FT municipal employees generally spell troubles for municipal finances. Let's make sure we keep our volunteers happy and appreciated.