The Mayor’s Office is working to shore up the pension program for existing city employees before it attempts to change the system for new employees, officials say.
Mayor Dewey Bartlett plans to ask the City Council to approve an ordinance change that would help ensure that the city’s $118 million pension obligation is paid off in 30 years or less, Mayoral Chief of Staff Jarred Brejcha said.
The plan’s current funding ratio — a measurement of assets versus liabilities — is approximately 78 percent.
“Before we do anything, we are going to make sure this current plan is funded the way it ought to be funded,” Brejcha said. “Most years, the city has made a reasonable contribution, but I can’t say in every year.”
A 2013 pension reform committee appointed by Bartlett to examine the city’s pension plans recommended that the city switch from a defined benefit program to a defined contribution program.
A defined benefit plan is a term used to describe a traditional pension system. A defined contribution plan is a term to describe a 401(K) plan.
The proposed change would not affect police officers or firefighters, who are covered by separate retirement programs.
Prior to the nationwide economic collapse of 2008, the city’s funding ratio was typically 90 percent or above, with the city reaching more than 100 percent in 2004-06.
In 2011, the city and its nonuniformed employees increased their contributions to the pension system for the first time in 20 years. The city’s contribution went from 6.3 percent to 9.3 percent, with the employees’ contribution increasing from 4 percent to 5 percent.
The contributions increased again in 2012. The city is now contributing 11.5 percent and employees 6.5 percent.
Bartlett’s plan would make it city policy to contribute a certain percentage each year, rather than making the contribution subject to the uncertainties of the budget process.
“Our actuary assumptions say that if the city makes an 11.5 percent contribution for the next 30 years, it (the pension program) would be fully funded if you assume the same returns,” Brejcha said. “That would ensure that the commitment that was made to the current employees will be met and we won’t be passing it down to future generations, and the debt won’t grow.”
In addition to setting the city’s annual contribution to the pension plan, the mayor’s proposed ordinance change would end the practice of “open amortization” of the pension debt.
Using that accounting method, the city can essentially restart the clock on its pension debt obligation each year as long as it makes its required annual contribution.
“It just leads to more payments and more debt and an extended obligation out into the future,” Brecjha said.
The Mayor’s Office had hoped to the have the new pension program in place by the end of last year. But Brejcha said the administration has proceeded cautiously.
“This is a tremendously important issue,” he said. “Any changes we make or reforms we implement we want to make sure they are right.”
Although the new pension system is being designed for new employees, existing employees will likely be able to participate in it as well, Brejcha said.
“It is our hope it can be an option for existing employees if they choose to,” he said. “
And if they want to stay where they are, they are welcome to stay in the existing plan.”
Source: Tulsa World