The plan, which would have to be approved by the Alabama Legislature, would increase police and firefighters’ contribution to their retirement –- boosting it from 10 percent of their pay to 14 percent -- and would decrease their benefits after retirement.
The city would also kick in an extra $1.7 million per year to shore up the fund – money that could come from a recently-passed 1-cent sales tax or from changes to the retirement plan for city employees not on the police force.
“It is one of the most significant problems that the city currently faces,” Finance Director Danny McCullars told the four council members in attendance at a Tuesday work session.
The retirement fund, which is funded through the city but legislated in state law, is in financial trouble. The city estimates the fund will be broke by 2025.
The retirement fund board has been grappling with the issue for 18 months. The board unanimously approved a set of proposed changes at a meeting last week, said Lt. Wayne Willis, an Anniston police officer and a member of the board.
The board agreed to put some burden on the plan members to help fix the problems. The proposed changes would require plan members to pitch in an additional 4 percent of their pay toward retirement . Members would also see a decrease in benefits under the proposed changes. The plan members currently can earn a maximum benefit of 90 percent of the average of the last three years salary. Under the changes, the maximum retirement benefit would be 75 percent.
The Star’s attempts to reach leaders of the local Fraternal Order of Police were not immediately successful Tuesday.
The city’s contribution to the retirement fund would increase as well, going from 16 percent of employees’ pay to between 36 and 38 percent. That would be an increase of about $1.7 million a year, McCullars estimated.
“That is a substantial jump and we all recognize that,” McCullars said.
The city could help pay for the increase by asking regular city employees to increase their retirement contributions to the Retirement Systems of Alabama from 5 percent to 7.5 percent. That move could save the city $170,000 a year, McCullars. Another cost-cutting move would be to phase out the retiree health care plan. That plan covers retirees and their families who are not yet eligible for Medicare. The change could save the city another $300,000 a year, McCullars said.
The proposed changes would add also two members to the three-member board –- one City Council appointee and the finance director for the city. The board would be able to make changes to the fund, giving the city more control of the fund.
“The new plan is going to offer some flexibility to where if you see there’s a problem you can adjust and that adjustment is what’s going to keep the fund going in the future,” Willis said.
One of the problems with the plan has been that it has not been changed over the years, McCullars said. With two city representatives on the board, the city would become aware of any problems very quickly, he said. In addition, any major changes to the plan –- a change in benefits or contributions –- would require a four-fifths vote.
“That means the city representatives or at least one of the city representatives would have to concur,” McCullars said.
The four councilmen in attendance –- Councilman Ben Little was not at the work session – agreed to the proposed changes, saying the city has to do something. Councilmen David Dawson and Herbert Palmore said the city owed it to the employees to ensure their retirement and both volunteered to serve on the retirement board if needed.
“We’ve got to take care of those who take care of us,” Dawson said.
Councilman Jay Jenkins said with a newly-approved 1-cent sales tax increase, the city is poised to pay for its proposed share.
“This is part of the reason that we pressed the sales tax issue,” Jenkins said.
Mayor Gene Robinson asked the councilmen if they would be willing to discuss and take action on the issue at the meeting on Feb. 14. Palmore said as long as the council followed the proper protocol he would be willing.
“All you have to do is fund it in the budget process; that is your formal action,” McCullars told him. “You made a general statement to support it in the resolution passing the sales tax. If you make a specific endorsement of the legislation that’d be great, but time is of the essence.”
The legislative session started Tuesday and any legislation has to get in line, McCullars said.
The changes will have to be advertised for four weeks before action can be taken. So Robinson asked the members if the city could start advertising them on Saturday. The council members agreed.
Willis said he thought the changes were fair for both the city and the employees.
“The board approved this and the overwhelming majority of the members support it,” Willis said. “Based on the actuary and the attorney and the entire board, this is the best way to go to secure the future of the fund.”
Contact staff writer Laura Camper at 256-235-3545.