Pension Focus 201

Pension Focus 201

Postby Nick Della Volpe » Mon Feb 24, 2014 4:52 pm

Let's peek at the existing/closed pensions G and C , for general government and the uniformed bodies -- they cover some 1491 workers as of fiscal year end. There are some 2255 inactive / retired workers. Or, with other misc retirees and active groups take us to a total of roughly 3746 people covered at fiscal year end.

The new plan H covered some 27 workers by fiscal year end, and now has approximately 90 new hires who will vest in 10 years and possibly retire in 20 years from now. Plan H is a good start on the overall pension problem.

We have not addressed the growing costs of those older pensions-- soon to cost us another $ 26M for the new fiscal year. The annual costs are growing by large leaps due to the large underfunded balance ($200 M at fiscal year end last June 30th). After a good market year that gross total has shrunk some, but the market remains volatile. Witness the down January, only now recovering.

Chattanooga has taken several steps to address their own pension shortfall of about $150M. The mutually agreed proposal goes to their city council this week. Among the cost cutters to help make their plan sustainable, police and fire employees have said through their reps, that they are willing to:
Cut COLA from 3% to 1.5%
Postpone COLA for 2 years when you first retire
Increase employee contributions from 7 or 8% of pay to 11% of pay
Make a few other concessions re age etc.

The Blackwell case does not address COLA. It is concerned with changing an existing formula for computing benefits earned by the last years of service. Chattanooga's Pension Plan Legal Counsel (Bill Robinson from Baker Donelson) has opined that they can adjust COLA.
Recently Colorado has done so.
Chattanooga union counsel from Nashville told workers they didn't have a sound basis to challenge a COLA change.
More importantly, the workers decided, after some handwringing that adjustments were needed for the plan to work going forward.

In a world of a constricting budgets, and An underfunded pension plan, workers and council and the administration should do the prudent thing and agree upon some prudent changes, like: raising some of the funds by increasing the employee contribution rate and reducing the COLA costs of the large 3700 person pension plan.

THINK ABOUT IT: A plan pretty on paper, that can't be reasonably funded, is no plan at all.
Nick Della Volpe
 
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Re: Pension Focus 201

Postby Nick Della Volpe » Mon Feb 24, 2014 10:38 pm

The Chattanooga Times reported on Feb 4th that the proposed pension changes in the Chattanooga plan would result in savings of $4M to $5M per year.

Knoxville's contributions to the employee plan here were at the $4M per year level back in 2005. They have grown rapidly to some $22M per year last year (drawing partly from the extra $10M paid in 2012). We are headed to some $35M per year by 2017. Meanwhile the employee beneficiaries are still paying in at around a $4M level. They need to carry a fair share of this burden.

How can we devote over 20% of our $183M budget for one fringe benefit? We are the city's fiscal stewards.
Somethin's gotta give.
Nick Della Volpe
 
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Re: Pension Focus 201

Postby Nick Della Volpe » Tue Feb 25, 2014 10:59 pm

SOME SIMPLE MATH:
COLA accounts for approximately $1.1M per year in added costs. It also increases the base under several of the plans, compounding increases in future years. (Moreover, we have been paying more than the actual CPI changes by making increases automatic.)

EMPLOYEE CONTRIBUTIONS: changing from e.g., the current 6% of pay to say 8% of pay would raise about $1.4M per year.
Nick Della Volpe
 
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Re: Pension Focus 201

Postby Nick Della Volpe » Fri Feb 28, 2014 9:49 am

Comparative Contributions to Pension Plan
Here is a rough look at the growing numbers

YEAR. CITY EMPLOYEES
2005/06 $4.44M $3.03M
2006/07 $5.63M. $3.13M
2007/08. $10.29M. $3.27M
2008/09 $7.16M. $3.40M
2009/10 $7.62M. $3.55M
2010/11 $9.76M. $3.72M
2011/12 $9.76M. $3.72M
2012/13. $21.81M. $3.85M ( City Includes &10M lump sum reserve)
2013/14. $13.76M. $3.88M (City to apply $6M from the 10M =19.76M)
2014/15. $16M. $3.8M (City to apply $4M from the $10M =20M)
Nick Della Volpe
 
Posts: 110
Joined: Mon Jul 02, 2012 4:00 pm

Re: Pension Focus 201

Postby Nick Della Volpe » Fri Feb 28, 2014 4:19 pm

Comparative Contribution Figures
Here is a rough look at the growing numbers
(note--2nd try at formatting in this odd type format; also attaching the Word file)


Year City Employee
Contributions Contributions
2005/06 $4.44M $3.03M
2006/07 $5.63M $3.13M
2007/08 $10.29M $3.27M
2008/09 $7.16M $3.40M
2009/10 $7.62M $3.55M
2010/11 $9.76M $3.72M
2011/12 $21.81 $3.85M
2012/13 $13.76M $3.88M (City adds $10M lump sum reserve to fund)
2013/14 ≈$16M ≈$3.8M (City applies $6M from $10M = $19.76M)
2014/15 ≈$23M ≈$3.8M (City applies $4M from the $10M = $20M)

TOTAL ≈$119.47M ≈$35.43M
Attachments
Comparative Contributions to Pension Plan (2).docx
See Attached
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Nick Della Volpe
 
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