Declaring it “the toughest decision I’ve had to make on the commission,” Mayor Jim Brown cast the deciding vote Aug. 14, at Town Hall. That vote approved both a five-year Deferred Retirement Options Program (DROP) window and an early-retirement incentive for general employees before their pension plan is frozen Sept. 30.
The 4-3 vote approved an additional annual cost of $58,332 for the DROP option that allows eight employees to enter the DROP before the plan freezes. The vote also approved a $6,241 annual cost for an early-retirement incentive. That amounts to an estimated $64,573 increase annually for costs associated with both provisions, for an estimated $1,937,190 estimated total amortization cost over the next 30 years.
Those figures, though, are actuary estimates that count on a 7.5% return rate. If the pension plan continues to hit a 5.6% return rate, as it’s doing now, those numbers will increase further.
Mayor Jim Brown and Commissioners Jack Duncan, Terry Gans and Pat Zunz voted to give general employees both retirement incentives against Town Manager Dave Bullock’s July 1 recommendation to leave them out.
Vice Mayor David Brenner and Commissioners Lynn Larson and Phill Younger voted against the retirement incentives motion.
At the end of a staff presentation Monday, Bullock told commissioners that if they left out the DROP option and the early-retirement incentive, general employees could still avail themselves of a new 401(a) account that allows them to invest up to 15% of their salary into the plan. Coupled with an already existing 401(k) account that general employees with at least five years of service can use, and most employees at Town Hall are able to invest up to 24% of their salary into two retirement plans once their pension plan is frozen.
The town also contributes 6.2% for Social Security, pays 100% for their individual medical insurance and provides long-term disability at no cost to the employees.
“Although it’s not a defined benefit, some would say it’s a healthy and very reasonable retirement option for employees,” said Bullock, noting the majority of the general employees already take advantage of the 401(k) account. “I think the range of options is fair and reasonable.”
The majority of the commission, though, voted to include the additional options, citing a fairness issue and noting the benefits were promised years ago to the longtime employees.
Gans said he believes the commission already reached its main objective by freezing the plan and “staunching the bleeding.”
“Fairness is never attainable, but you have to try and reach for it,” Gans said.
Duncan noted that giving the employees both options would cost a taxpayer with a $500,000 home an extra $7.09 a year.
“I can afford $7 per year, and I put that up against the issue of fairness and the commitment we have made to our employees,” Duncan said. “When you start nickel and diming employees, you affect morale and good employees get hurt.”
“All they are asking for is the benefits they had under their previous plan to be continued,” Zunz said. “I do believe it’s wrong to take away these benefits for a limited amount of people.”
Brown didn’t give an opinion until he cast the deciding vote.
“I’ve been all over the place today, and I didn’t know how I was going to vote until five minutes ago, and it’s the toughest decision I’ve had to make on the commission,” Brown said. “I’m voting yes for one reason. These are limited options just for the remaining eligible employees. We’re trying to stop the bleeding. This doesn’t stop it immediately, but it is stopping it.”
Larson was upset with the vote and almost walked out of the meeting after the 4-3 vote.
“We’re off the track here and adding more liability to a broken system,” said Larson, who offered to agree to the less expensive early-retirement incentive, but refused to agree to the DROP option, too.
Younger noted the DROP option for general employees was more enticing than the DROP option afforded to firefighters as part of their new contract.
“We’re actually increasing benefits for the general employees,” Younger said. “That’s certainly inequitable, and I cannot support the option on the table.”
Brenner said he couldn’t support the motion. He urged the town to take advantage of the predicament by creating a new compensation agreement for all employees in the future.
Contact Kurt Schultheis at firstname.lastname@example.org.
WHY COMMISSIONERS VOTED THE WAY THEY DID
“I’m voting yes for one reason. This is a limited plan. We’re trying to stop the bleeding. It’s not stopping it immediately, but it is stopping it. It’s the toughest decision I’ve had to make on the commission.”
— Mayor Jim Brown
“We’re actually increasing benefits for the general employees. That’s certainly inequitable. I’m open to other options, but I cannot support the one on the table.”
— Commissioner Phill Younger
“When you start nickel and diming employees, you affect morale, and good employees get hurt because they’ve been there a long time and you’re taking their benefits away. This is about fairness we should seek to attain.”
— Commissioner Jack Duncan
“I’m going to vote no, but not because I’m mad at anybody. We ought to use this opportunity to re-examine our whole compensation plan and set a new compensation agreement going forward.”
— Vice Mayor David Brenner
“All these employees are asking for is the benefits they had under the previous plan to be continued. Our goal has been to stop the greatly increasing unfunded liability, which we are doing. But I do believe it’s wrong to take away these benefits for a limited amount of people.”
— Commissioner Pat Zunz
“We have a broken system and a huge unfunded liability on all three funds. If you have that, why in the world would you go add more numbers to it? What message do we send when we’re adding additional expenses to a sinking fund?”
— Commissioner Lynn Larson
“Fairness is never attainable, but you have to try and reach for it. We’ve staunched the bleeding. We have to think about making decisions in a manner that doesn’t reduce morale.”
— Commissioner Terry Gans