By Jana Cone/reporter
TIFTON
May 07, 2008 09:09 pm
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The City of Tifton has not yet resolved the $1.2 million shortfall to its employees’ pension fund for 2006-2007. The shortage was discovered last year by the city’s actuary, Chuck Carr, and was reported in The Gazette in December 2007.
Although the $1.2 million must be put into the pension fund, the shortage was not due to the city failing to make payments to the pension fund City Manager Mike Vollmer told The Gazette on Wednesday morning. Rather, he said, it has resulted from outdated information from a previous actuary.
“Chuck was engaged as our actuary in early 2006,” Vollmer said. “The first thing he did was to review it (the retirement plan).”
Vollmer said that Carr also looked at their return on investment. The city’s investment manager is Allen, Mooney and Barnes of Thomasville. “We have $12 million invested,” Vollmer said. “So he was looking at the return we are getting on our $12 million through Allen, Mooney and Barnes.”
Vollmer said they learned last year that the previous actuary had been using outdated mortality tables. “This had given us a skewed picture of where we were at,” Vollmer said.
Another problem discovered by Carr was that the previous actuary was using an 8 1/2 percent investment return. “That’s hard to get,” Vollmer said. He explained that the city is only allowed to invest 55 percent of its equities.
Because of the use of outdated mortality tables and an unlikely percent return on investment, Vollmer said the city ended up with the $1.2 million shortfall when Carr made the 30 to 40 year projections with more accurate information.
“That is called our unfunded liability,” Vollmer said. He said it was money that was not ever contributed because the city did not know to contribute it.
Vollmer said he hoped that the matter would be resolved “in the June, July time frame (end of this fiscal year).”
Both Vollmer and Carla Cooper, the human resources manager, said they did not know where the city was going to get the $1.2 million to add to the employees’ pension fund. Cooper said she had a “hot line” to Carr and spoke with him several times a week.
“We just have to find out what our options are here,” she said.
Vollmer said he hoped they would be able to maintain the integrity of their current system. Currently city employees do not contribute to the pension fund.
Vollmer said that about a month ago the city’s retirement board met with Carr to discuss the issues and brainstorm on how it could be solved. Vollmer said there were five employees — from different departments — along with the mayor, city manager, finance manager and human resource manager on the retirement board.
“Some of the suggestions made, we said were not an option for us,” Cooper said. “We were just brainstorming.”
Vollmer said the retirement board would vote on changes to be made and those recommendations would go to the city council. Ultimately, it will be the city council that decides what changes have to be made to the retirement plan, he said.
“Within the next year, we will probably not be able to continue our current plan for new employees,” Vollmer said. He said changes for new hires might include contributing to the pension fund and increasing the age of retirement. “Now they can retire after 25 years at age 55 with no deductions,” Cooper said.
Vollmer said they now have a “defined benefit plan” but may change to a “defined contribution plan.”
Vollmer said the $1.2 million “is just a one time thing where we have to pump in money.” He said their costs for the pension plan is $2.14 million every year.
Regarding the coming changes to the pension plan, Vollmer said, “Honestly, we have not made a decision on what we are going to do.” Vollmer added, “We are not trying to hide any information from our employees.”
To contact reporter Jana Cone, call 382-4321, ext. 208.
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