Changes would need law­mak­ers’ ap­proval

Austin American-Statesman - - WORLD & NATION -

ers and be com­pet­i­tive with pri­vate em­ploy­ers, said Bar­ney Knight, an at­tor­ney who for 18 years has rep­re­sented the City of Austin Em­ploy­ees’ Re­tire­ment Sys­tem, which man­ages the pen­sion fund.

Work­ing with the pen­sion board, city of­fi­cials sought state leg­is­la­tion in 1999 that tweaked one el­i­gi­bil­ity rule to let work­ers of any age re­tire with 23 years of ser­vice in­stead of 25. “Two years may not sound like much, but it made many more peo­ple el­i­gi­ble to re­tire,” Knight said.

The mea­sure — part of a leg­isla­tive plan that the City Coun­cil and city man­ager’s of­fice agreed to pur­sue — also raised a mul­ti­plier that the city uses to cal­cu­late pen­sion ben­e­fits from 2.6 to 2.7 per­cent and al­lowed the city and board to in­crease it again a few years later, to 3 per­cent, Knight said. Ac­tu­ar­ies cer­ti­fied, at ev­ery step, that the more gen­er­ous pen­sion terms would not harm the fund’s health, he said.

Cur­rently, city work­ers re­tire, on av­er­age, at age 57 with 20 years of ser­vice and a salary of about $57,000. That av­er­age re­tiree would col­lect a pen­sion of $34,200 a year, be­cause the city mul­ti­plies years of ser­vice by 3 per­cent and by the worker’s av­er­age an­nual salary from the high­est 36 months of base pay.

The city al­lows work­ers to buy up to five years of ser­vice time to re­tire early or in­crease their pen­sion ben­e­fits.

Be­cause em­ploy­ees can col­lect a pen­sion af­ter work­ing only 20 to 23 years, nearly half of man­ager-level em­ploy­ees will be el­i­gi­ble to re­tire in the next five years.

That im­pend­ing “brain drain” means Austin might lose work­ers who are well-versed in city op­er­a­tions, Hu­man Re­sources Di­rec­tor Mark Washington said. Chang­ing the pen­sion plan could help avert such an ex­o­dus, he said, but the plan must re­main gen­er­ous enough to draw and re­tain qual­ity work­ers.

City bud­get staffers weighed sev­eral pos­si­ble changes to the pen­sion for­mula and are still work­ing on a fi­nal rec­om­men­da­tion. But they agree that fu­ture work­ers should be 60 to 62 years old and have ca­reers span­ning 30 years to get full pen­sion ben­e­fits. They want to re­duce the mul­ti­plier to 2.3 or 2.5 per­cent, which means fu­ture re­tirees would earn about 70 per­cent of their pre-re­tire­ment in­come, as cur­rent re­tirees do, but would have to work longer to col­lect it.

City bud­get of­fi­cials also say fu­ture work­ers should be able to re­tire early only in ex­change for re­duced ben­e­fits and should be al­lowed to buy ex­tra ser­vice time only to in­crease their pen­sion pay­out, not to be el­i­gi­ble to re­tire younger.

Those changes would make Austin’s plan more in line with other cities’ pen­sion pro­grams, Kn­odel said.

An­thony Ross, an au­dit man­ager at Austin En­ergy and one of four em­ploy­ees on the pen­sion board, said he prefers an op­tion that would al­low fu­ture work­ers to re­tire at age 57 with 28 years of ser­vice.

“We are go­ing to have em­ploy­ees work­ing side by side for years, one worker un­der the old plan and one un­der the new one,” Ross said. The 57-28 op­tion, “in terms of fair­ness and eq­uity, would cre­ate less of a gap” be­tween the old plan and the one bud­get staffers have pro­posed, he said.

Em­ploy­ees and the city both pay into the pen­sion fund. Work­ers pay 8 per­cent of their base salaries, a rate that hasn’t changed since 1999.

That rate could be in­creased by an em­ployee vote or a man­date from the state Leg­is­la­ture, but city of­fi­cials haven’t asked work­ers to con­trib­ute more be­cause the cur­rent rate is higher than or sim­i­lar to those of other Texas cities and be­cause Austin work­ers haven’t re­ceived pay raises in a few years, Kn­odel said.

The city has been in­creas­ing its con­tri­bu­tion rate since 2006, af­ter the fund showed signs of ill health. The city now con­trib­utes an amount equal em­ployee: $41,250 Em­ploy­ees can re­tire ear­lier than age 50 if they have 30 years of ser­vice. They get re­duced ben­e­fits. El Paso Age 55 with 10 years of ser­vice Any age with 30 years of ser­vice An­nual pen­sion for the hy­po­thet­i­cal em­ployee: $37,500 Em­ploy­ees can re­tire early, at ages 40 to 54, if they have 10 years of ser­vice. They get re­duced ben­e­fits. Fort Worth Age 65 with five years of ser­vice Age plus years of ser­vice equals 80 An­nual pen­sion for the hy­po­thet­i­cal em­ployee: $45,000 Em­ploy­ees can re­tire as early as age 50 but get re­duced ben­e­fits. San An­to­nio (part of the Texas Mu­nic­i­pal Re­tire­ment Sys­tem, a pen­sion sys­tem for more than 800 Texas cities) Age 60 with five years of ser­vice Any age with 20 years of ser­vice An­nual pen­sion for the hy­po­thet­i­cal em­ployee: Would vary depend­ing on what the em­ployee con­trib­uted over time No early re­tire­ment op­tion. Texas Em­ploy­ees Re­tire­ment Sys­tem

Age plus years of ser­vice equals 80 An­nual pen­sion for the hy­po­thet­i­cal em­ployee: $34,500 Em­ploy­ees hired af­ter Sept. 1, 2009, will be able to re­tire early. But their pen­sion ben­e­fits will be re­duced by 5 per­cent for ev­ery year they re­tire be­fore age 60, with a max­i­mum re­duc­tion of 25 per­cent. to 12 per­cent of em­ployee salaries, but by adding the ex­tra $9 mil­lion a year for three years, it would in­crease that rate to 18 per­cent.

That is closer to what other cities con­trib­ute, Kn­odel said.

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