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Board approves new retirement plan


Farragut’s Board of Mayor and Aldermen narrowly approved — by a 3-2 vote — adopting a new retirement plan for Town employees, after hearing requests from Town staff asking for a defined benefit plan and charges from Farragut residents to opt into Social Security.

In the end, the Board did opt into Social Security, and voted to revamp its 401(a) plan into a 4 percent matching program, with Town staff contributing 4 percent of its pay and the Town matching that 4 percent.

The new program ups the Town’s contribution rate 2. 2 percent.

“Regardless of which option is chosen, I would challenge all Town staff to remember that neither of these plans will get you where you need to be,” said Ron Honken, at his first meeting as a new alderman Thursday, April 28.

“It does take a certain amount of personal sacrifice as well,” he added.

At issue was the Town’s previous retirement plan, which included an 8 percent contribution from the Town and no contribution from employees. The Town opted out of Social Security in 1984.

The retirement program as it was would have given the average employee only 34.2 percent of their payroll when they retired.


Farragut Parks and Leisure Services director Sue Stuhl was one employee who spoke in favor of a defined benefit plan, which would have helped long-term employees catch up on their retirement faster.

“It is unfortunate, but part of the problem is that we were not given all the information,” she said. Specifically, Town staff was never told that Social Security they had accrued from other jobs would be penalized because they worked at the Town, which opted out of Social Security.

“There’s a whole bunch of issues going on here,” Public Works director Bud McKelvey agreed.

“I’m not asking you to fix all the [fiscal] problems,” McKelvey told the Board. “[But] I could work and pay Social Security for the next 20 years, and it wouldn’t help me with what I need.”

McKelvey and Stuhl both warned the Board that having senior employees who could not afford to retire could also cost the Town a lot of money through healthcare and medical costs.

Community development director Ruth Hawk said, “All costs aside, you need to think about the employees who have really made the Town what it is.”

But audience members and Town residents spoke out against a defined benefit plan, which promises the same benefits regardless of market fluctuations. If the plan’s funding fell short at any time, the Town would have to make up that cost in higher contribution rates.

[There is] “no way one can guarantee the cost of that program,” Town retirement consultant Bob Cross said.

“I am not going to be happy if the Board of Mayor and Aldermen signs on for a partially funded or unfunded mandate,” Fox Den resident Rick Harrod said.

“This is an unfortunate situation, but we’re not going to correct this thing in one fell swoop,” Jack Glover, also of Fox Den, said.

Alderman Bob Markli asked for a bit more time to digest information before making a vote, but the Board was encouraged by Town Administrator David Smoak to make a decision in time for this year’s budget cycle.

McKelvey agreed.

“We have beat this to death. We’d love to see a vote on this, one way or another, and put this thing to bed,” he said.

The Town has been studying retirement plans for about three years.

Honken said the Town needed to make the best decision for the long-term, and continue to look at solutions to fix the more immediate needs of long-term employees.

“Those are two different issues,” he said.

Honken moved to adopt a defined contribution plan with a 4 percent match at 100 percent, as well as to join Social Security. Markli seconded that motion, and it was passed with Alderman Jeff Elliott and Vice Mayor Dot LaMarche dissenting.

 

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