DOTHAN, Ala. – Making no change to employee retirement benefits is a decision made at the Enterprise City Council meeting April 6.
“I do totally and 100 percent believe in taking care of our city employees,” said Councilman Greg Padgett before the vote. “I just think there might be a better way to do that.”
At issue is a May 8 deadline to accept an option offered by the Retirement Systems of Alabama for municipalities to change retirement benefits for their Tier II employees to those of Tier I employees beginning at the start of the next fiscal year in October.
Also at issue is that—combining the employee and the city’s contributions—$540,000 is the estimated cost to the city to do the conversion.
Another factor at issue is that a salary survey currently being conducted for the city will not be completed by the May 8 RSA deadline and those results could drive the city’s estimated cost higher.
“I just want to say that because we do not have the salary study I’m very concerned about how this could affect our ability to make salary improvements,” Padgett said. “Also looking at the whole package I think the city’s current retirement system is better than most private businesses.
“Our insurance and benefits are excellent—again, better than most private businesses,” he added. “So I think we have a good package already.”
The city of Enterprise pays 100 percent of the $521 single coverage for health insurance monthly for each employee. For family health insurance coverage, the city pays $542.06 of the premium with the employee paying $208.94.
The council could have voted to accept the RSA option, voted to reject the RSA option or not vote on the issue at all. The latter two options would have resulted in no change to the current retirement system.
At a previous city council meeting, Human Resources Director Christina Meissner told the council that RSA had created the option because they were hearing from municipalities that they were having difficulty recruiting and retaining employees under the parameters of the Tier II benefits, established in 2012.
All municipal employees hired before 2012 are in the Tier I classification and can retire after 25 years of service, regardless of their age. RSA created Tier II in 2012 with different parameters to include an employee having to work 10 years before becoming eligible for RSA retirement and not being able to draw retirement before age 62.
Tier II employees currently pay in 6 percent towards retirement for non-law enforcement employees and 7 percent if they are police or firefighters. If the city had opted in to the RSA change, the Tier II employee contributions would have been increased to 7.5 percent for non-law enforcement employees and 9.5 percent for police and firefighters.
Meissner said that if the city had opted in to the RSA option to give Tier I benefits to Tier II employees, the city would incur a financial “catch-up cost” of at least $540,000. “I would rather take that $540,000 and attack our compensation plan with more surgical precision,” said City Council President Turner Townsend at a special council work session March 18 dedicated to discussion about the RSA retirement option. “There is no ‘pension fairy’ somewhere that sprinkles pixie dust on this money. This is an investment account that Enterprise has.”
At that meeting City Administrator Jonathan Tullos outlined research he had obtained. “It means different things to different departments but once you make the decision, it’s for everybody,” Tullos said. “What impact might this have on other projects the city is considering? There is a pay study out there to consider, what are the results of that going to suggest?’ he asked.
“We’re going to make a decision for 100 percent of our employees that only impacts 40 percent,” said Townsend at the March 18 work session. “Not that we don’t appreciate our retirees, but the private sector has moved away from pensions because they are not a good idea.”
At the March 18 work session Padgett said that he was not aware that the city was under the pension-type plan until being on the council. “I was kind of surprised because so many companies are leaving pension plans, because companies have literally gone bankrupt from that kind of plan,” he said, adding that he was also concerned because the city salary study was not yet completed.
At the March 18 work session, Councilman Eugene Goolsby agreed. “What worries me is what it is going to do to our budget in the long run,” he said. “How are we going to accomplish all the things that we are doing?”
At that work session March 18 Councilwoman Sonya Rich said the decision was a hard one. “We want to be good stewards of our city’s finances but we also have the additional goal to be good to the people who work for us,” she said. “That is just as important to me as the roads that we ride on. We have good people here and having good people is as important as having good streets.”
“I’m not a businessman. I’m just an old Army guy,” said Councilman Scotty Johnson at the March 18 work session. “But I know we are charged with being good stewards of the taxpayers’ money.”
The council is not allowed to vote in a work session but agreed March 18 to call for a vote at the April 6 council meeting.
The resolution to add Tier I benefits for Tier II employees was defeated with three votes against and two votes for the measure. Rich and Johnson voted for the resolution. Townsend, Padgett and Goolsby voted against the resolution.
The next meeting of the Enterprise City Council is April 20 in the council chambers at Enterprise City Hall. A work session begins at 5 p.m. and a voting meeting begins at 6 p.m. Both meetings are open to the public.
