Monday, February 23, 2009

DB plans: the Council's inaction continues

The Town of Cheshire currently offers town employees two basic types of pension plans:

1) defined benefits (DB)
2) defined contributions (DC)

Here's an explanation of the differences.

And here's a recent history* of the Town Council's inaction on pension plan reform.

If you read the history, you know I'm of the opinion that the Town needs to move from DB plans to DC plans. DB plans are simply too risky for the taxpayer. This has been clearly demonstrated by the reality that the Town's DB plans are now underfunded by $20,000,000.** Furthermore, if employees had been controlling their own destiny... they may have placed their money elsewhere - in safer investments. And they may not have experienced the dramatic losses taken by the Town's DB plan.

And since the Council's inaction on ending DB plans continues, I again raised this topic (at the February 10 Council meeting):

Unfortunately, I may not have been clear. Best I recall, the Council discusses collective bargaining agreements in executive session - not pension options for non-union staff. And we also discuss current employees, not future employees. But for further clarification, here's a breakdown of the types of town ee's:

In this context, I'm concerned only with future non-union employees.

And with regard to future non-union employees, I want this Council on the record as to whether it wishes to continue offering DB plans to future non-union employees. I mean, this Council's inaction is unacceptable.

Furthermore, since last June the town has continued to hire non-union employees... employees who now are probably in the DB plan... the same DB plan that seems to lose money everyday.

I'm tired of adding to this underfund long-term liability and want Council members to explain why they feel the Town must continue offering DB plans to future non-union employees. This lack of leadership must end. The issues are too serious for this sophomoric approach to governing.

Tim White

* I wrote this post in November 2008 and it covered the preceding three years or so.
** $20,000,000 is my current estimate.

1 comment:

Breachway said...

Your right Tim. I have posted a few notes on DC plans and I am not sure why the town isn't making a move. Most companies with DB plans have phased them out as new employees come on board of the last few years. maybe the TC is smarter than the corporate world. If Ecke is a CPA- i don't see how he is not on top of this due to a better understanding of the liabilities...