MRJ on the elimination of DB plans for future non-union hires
The Sunday MRJ had a nice piece about last week's Council vote to eliminate defined benefit plans for future non-union hires. It basically just explains how the defined benefit plans are no longer an option, but that 457(d)* plans will be funded going forward. Anyway, this is where we stand now:
I'm hoping that the current union contract negotiations can at least include the elimination of DB plans for future union ee's. I'm sure it will cost something. That's the nature of negotiations. But as I was quoted in the MRJ article "I'd be willing to pay a bit more to the unions up front to know the cost with certainty rather than saying, 'Someone will pay for (pensions) in the future.'"
If we can get agreement on that, I'd consider it a huge victory because there would be no new hires joining the plan. And over time, those long-term liabilities would be eliminated... ultimately forcing sitting Council members to raise taxes, if they make promises... unlike the current situation where Cheshire's plan is currently underfunded (due to the market)... or the state's situation where they simply never funded their DB plans in the first place.
Tim White
* I believe a 457(d) is the public equivalent of a 401(k).
4 comments:
If you are going to hire a consultant for anything, I would think this would warrant one. There is a lot of potential future pension liability on the line. The town's starting point should be simple. "We are not going to agree on anything that includes a DB plan." You are going to give them the 5-6% in the 457 plan plus a little something else to keep the union hacks happy.
What about the plans that over perform? There are plans that the town has never made any (or very small) contributions to over the past 25 years, that are overfunded to thier potential liability. Do any of you plans address what to do with any surplus that came from employee contributions and frugal management. These funds would be refunded to the contributors not the town right????
With regard to ee contributions, I presume they belong to the ee's and would be returned to the ee's.
Frankly, I'll be excited if we could just close down DBs for future union ee's. So your concern is likely a non-issue in terms of my goal... but a very real one nonetheless.
If we moved forward with this, I'd probably suggest that the Pension Board follow Breachway's advice... get some outside help.
With this stuff, there are a million moving pieces... with impacts thirty years out. No doubt our actuaries would need to be pretty involved.
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