City of Phoenix staff took final public comments on pension reform Monday and Tuesday before presenting their final report to the City Council on Sept. 25.
City staff presented three scenarios for pension reform during the two meetings. The first would keep the city’s defined benefit plan but make contributions to the plan even between the employer and employee. That scenario would see an almost $600 million savings for the city over 25 years. The first scenario will most likely be the staff’s recommendation to council.
The second scenario was a defined benefit with a cap for the city’s contribution. Cumulative saving by 2037 is estimated to be more than $725,000 with the possibility for more saving depending on what the city’s cap is set at.
The third scenario was a defined contribution plan. Two models of the third scenario show the plan costing the city millions in the first 25 years. Rick Naimark, deputy city manager, said this model was requested by the City Council. It’s a plan that some people like because after 25 years there would be no more liability the city would have to pay for the pension plan.
Police, fire, elected officials and current retirees will not be affected by any pension reform.
Those at the meeting on Tuesday morning at the Burton Barr Central Library thanked staff members for their work. A current retiree expressed approval for the first scenario while Phoenix residents Chet Kite and Wes Harris expressed a desire for the staff to truly consider the third scenario.
“Since the year 2010 there have been 29 municipalities in the United States that have declared bankruptcy primarily because of the pension system,” Kite said. “There are basically two forms of retirement systems. One is a guaranteed pension, which COPERS (City of Phoenix Employees’ Retirement System) has, the second is a defined contribution, commonly called an IRA. The basic difference between these two systems is the first the city accepts the liability and responsibility for any variation in investments made. The second, the employee accepts the responsibility.”
The goals of the pension reform is to reduce the impact of COPERS on city budget, move to more equitable sharing of contribution and plan risk between employees and employer, increase length of service and maintain competitiveness.
A Pension Reform Task Force was created in January of 2011. The task force conducted 13 public meetings and made its recommendation to the City Council in February of 2012.
Council and staff have been reviewing the task force recommendations and watching as legal issues in the state’s pension plan have been worked out. On June 19 City Council adopted a time line and requested that staff return with more exact models and analysis of reform options.
The City Council is expected to review the reform options on Tuesday, Sept. 25 and possibly move to put the item on the March 12, 2013 ballot. If pension reform is put on the ballot the changes would take effect July 1, 2013.
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