Monday, April 20, 2009

Moving to "defined contribution" pension plans is back on the agenda

Many of you know that I've been trying (for years) to move the Town of Cheshire away from offering Defined Benefit Pension Plans (DB) and to Defined Contribution Pension Plans (DC). Most of my efforts were quiet, trying to find five votes to make the change. After a while though, I realized the votes were not forthcoming. So I took my case directly to the voters on June 24, 2008 when a related pension change was on the agenda.

Recognizing that not all employees are the same, I tried to begin addressing the DB and DC in a more systematic way, like this:And the Council Chairman graciously referred my concern to the Personnel Committee (despite resistance from the Personnel Chairman). And though I thought my immediate concern (elimination of DBs as an option for future non-union hires) would be addressed by September, it never hit the Personnel Committee agenda until October. And it was at the November 10, 2008 Council meeting that we heard this promise:

Well, the budget has now come and gone. Did anyone hear any discussion about DB vs. DC plans?

No. There was no discussion.

And I knew there would be no discussion. See... after a few years of doing this, you start to be able to distinguish between genuine consideration and pure lip service*. And I knew this discussion was lip service. So back in December I took a few days to compile this history... knowing full well that it would be necessary to demonstrate what had been happening.

Regardless, it's obvious that the Personnel Committee opposes my recommendation. And while they continue to employ their usual tactics of deny, defer, delay, The Rubber Stamp has died.

There's a new sheriff in town.

A Council committee open-minded to the notion of eliminating DBs for future non-union hires has agreed to place it on the agenda. The Ordinance Review Committee Chairman, Sheldon Dill, will be reviewing my recommendation. We'll see where it goes from there. But I'm confident that Sheldon will at least seriously consider my suggestion... unlike the lip service that has been paid to the voters of Cheshire since June 24, 2008.

And there's another benefit to using DC plans that I had never before considered. If an employee retires and returns, there's no "double-dipping." That's a problem the state has faced. And using DCs would eliminate that problem.

Tim White

* For another example of lip service, click here. Performance contracting is a perfect example.

1 comment:

Breachway said...

The numbers for 2009 could look even worse than 2008 for the DB plan. The rate of actual return will probably still be lower than the actuarial/expected return, even if it is higher than 2008. The fund balance that is gaining interest/value is considerably lower due to 2008 losses so even a better rate of return from 2008 won't gaurantee a smaller unexpected loss....further increasing pension expense. But I am sure the other CPA on the board has worked this all out.