News
Opinion
Sports
Business
Community
entertainment
Schools
News
Announcements
Classifieds
Place Ad
Advertising
Contact Us
Archives
Search

Board considers staff retirement options


New retirement plan options for Farragut’s staff have essentially been narrowed to two.

“We tried to come up with a plan, or a combination of plans, that could be an option,” said Bob Cross of USI Consulting Group, the company that has evaluated the Town’s current retirement plan and recommended two new ones.

Currently, the Town contributes 8 percent of an employee’s salary into a 401(a) account; the employee contributes nothing, but can contribute to a voluntary 457 plan. Most don’t. The Town doesn’t participate in Social Security.

The recommended new plans include the Town keeping a modified version of its 401(a) plan — one in which the Town would provide 4 percent of pay and the employee would be mandated to provide the other 4 percent — and in which the Town would join Social Security, which comes in at 6.2 percent of pay.

In the second option, the Town would continue to opt out of Social Security and would scrap its current plan totally, instead adopting a defined benefit pension plan. The Town’s funding level would remain at 8 percent of pay, and employees would contribute 6 percent.

“There is no easy solution,” Cross told the Board of Mayor and Aldermen at its workshop Thursday, April 14. The Board didn’t make any decision Thursday night; a vote is expected at the Board’s meeting later in April.

The Town’s retirement system is under-funded, Cross told the Board, behind the average for both public and private employers. That’s largely because Farragut opted not to join Social Security in 1984, and because most of its employees have never contributed to retirement funds themselves.


“If you had Social Security, I wouldn’t be standing in front of you,” Cross said.

“And we can all hope and wish that employees will contribute ... but if you think of Social Security and most plans, employee contribution is mandated,” he added.

Alderman John Williams called the retirement fund fix “a terrible conundrum,” particularly considering the fact several of the Town’s employees are near retirement age but won’t have enough money to retire with the current plan — or with a new one, for that matter.

Cross said adjusting the retirement fund for employees who are near age 65 would be “cost prohibitive” and would “swamp the Town’s budget.”

“Someone or someones will be unhappy with your decision — there’s no way around it,” Cross told the Board.

Mayor Ralph McGill asked Cross which of the options he would choose, if he could.

Cross said he’d pick the defined benefit plan because it most closely addresses retirement problems for the Town’s employees near age 65, and because it keeps the Town’s contribution levels closest to 8 percent.

However, Cross said defined benefit plans — which promise a definite benefit rather than require a definite contribution as a 401(k) plan does — have a negative perception from the public.

“I would say it’s extraordinarily negative,” Cross said.

Cross said that if the Town did adopt a defined benefit plan, it should also adopt rules that make the plan difficult to change in order to control costs.



Alderman Jeff Elliott said he was aware of that public perception: “Defined benefit plans have a perception of an up-ended bucket.”

“It will not be without controversy,” Cross said.

McGill also asked Cross if he would put the decision up for a referendum.

“I believe in democracy,” Cross, a Farragut resident, answered.

Cross recommended the defined benefit plan, but Farragut’s personnel committee recommended the Town adopt the 4 percent matching plan with Social Security.

“This will take a lot of thought,” McGill said.

 

News | Opinion | Sports | Business | Community | Schools | Obituaries | Announcements
Classifieds | Place Ad | Advertising | Contact Us | Archives | Search

© 2004-2014 farragutpress