Council votes in new pension plan

By Jana Cone/reporter

TIFTON June 28, 2008 08:49 pm

— Next Tuesday, the City of Tifton will implement a new pension plan for new hires. At a called meeting of the City Council on Thursday afternoon, council members unanimously passed an ordinance that will change city employees’ retirement plan as of July 1.
The current pension plan will remain in place for all current employees. However, in order to fully fund the pension plan for current employees, and not have a $1.2 million unfunded liability like the city just faced in their 2009 budget, the city will change the amount of the employer contribution from 16 percent to 27 percent. Vollmer said the 11 percent raise in the amount of the city’s contribution amounted to over one million additional dollars the city would be contributing next year.
Human Resources Director Carla Cooper said, “The $1.2 million unfunded liability was from previous years of not updating the mortality and investment rates.” She said of the $1.2 million, “It was a catch-up, if you will.”
Changes in the pension plan for new hires include:
• A multiplier of 1.5 percent as opposed to the current multiplier of 2 percent. To calculate the employee’s amount of retirement benefit, five years of the employee’s highest salary amount is multiplied by 1.5 for new hires and by 2.0 for current employees and then multiplied by the years of service. For example, if an employee’s highest salary (on average) is $30,000 and he has 20 years of service, then $30,000 X 2 percent equals $600 X 20 which equals $12,000 annual retirement benefit, or $1,000 per month for a current employee.
• Mandated 5 percent contribution by employee. In the current plan, employees do not contribute to their pension plan. In the new hire plan, employees will be required to share in the cost of the plan and contribute 5 percent of their salary.
• Sick leave credit will change from 100 percent to 50 percent. For example, under the current plan, a 30-year employee with four months of unused sick leave would be credited with 30 years and 4 months at retirement. Under the new hire plan, the 30-year employee would be credited with 30 years and 2 months at retirement.
• The normal age of retirement changed to “Social Security age” or 65. At age 55, an employee with at least 30 years of covered service can retire; or at age 62 for an employee with at least 25 years of covered service.
City Manager Mike Vollmer said that in making the above changes to the city’s pension plan, the retirement board looked at the Georgia Municipal Association’s pension program. “This program is much more in line with what other cities and communities are doing,” he said.
Vollmer said it was a “morale booster” for the current employees to be able to keep their current pension plan. He estimated that over the next five years, the new plan would save the city some $614,000 a year on retirement costs.
Vollmer referred to the $1.2 million the city had to find for the 2009 budget to fully fund the current pension plan a “a one time big hit.”

To contact reporter Jana Cone, call 382-4321, ext. 208.