January to bring changes in Little Rock retirement plan
LITTLE ROCK (KATV) - There are drastic changes coming to the retirement plans of Little Rock city employees.
Following the sales tax election in 2011, the city hired a consultant to design a pension plan. Instead of getting a lump sum when you retire, you will get a monthly check. The changes take effect January 1, 2014, according to Don Flegal with the city's human resources department.
Employees in uniform already have a state-mandated pension plan. The rest of the city's roughly 1,000 employees are all going in the new retirement system. Flegal says it is not a bad thing. In fact, he said the city's contribution will grow from the current 7 percent up to 9 percent.
Still, change sometimes brings uncertainty. Some employees who did not want to speak against the new plan on camera
told Channel 7 News that small checks instead of a lump sum after
decades of service will hurt them.
Employees over 60 years old are allowed to opt out and all employees are allowed to leave the money they've already earned in their current plan.
Flegal said that under the new program, pensions will pay out 2 percent of employees' final average pay for every year they worked. That means someone who works for the city for 25 years can retire with a pension that will pay out 50 percent of their final average pay. Flegal said the new system also includes a cost of living provision.
"No one is going to be worse off," insisted Flegal. "Everyone is going to be better off."
Flegal expects the new system to help with employee retention. This week, the Convention and Visitors Bureau requested to put their employees in the city plan.
ORDINANCE: AN ORDINANCE TO ADOPT A CITY OF LITTLE ROCK NON-3 UNIFORM EMPLOYEES DEFINED BENEFIT PENSION PLAN 4 AND TRUST; TO ADOPT AN AMENDED NON-UNIFORM 5 EMPLOYEES DEFINED CONTRIBUTION PLAN; AND FOR 6 OTHER PURPOSES.
WHEREAS, pursuant to Little Rock, Ark. Res. No. 13,663 (March 19, 2013), the Board of Directors 9 authorized work by City staff and outside consultants to develop all necessary documents to implement a 10 new pension plan for non-uniform employees of the City, to be effective January 1, 2014 because the 11 existing defined contribution pension plan does not adequately provide benefits for long-term employees; 12 and, 13
WHEREAS, to adequately provide retirement benefits for full-time long-term employees, it is 14 proposed that the new defined benefit plan, as well as the defined contribution plan, provide for employee 15 contributions; and, 16
WHEREAS, it is desired that such employee contributions be made on a before-tax basis; and, 17
WHEREAS, the work to develop a new pension plan has been accomplished and the Board of Directors 18 desires to move forward to adopt the attached City of Little Rock Non-Uniform Employees Defined 19 Contribution Pension Plan and Trust and to amend the existing City of Little Rock Non-Uniform Employees 20 Pension Plan (the "Defined Contribution Plan") to make the necessary changes in light of the adoption of 21 the new Non-Uniform Employees Defined Benefit Pension Plan and Trust; and, 22
WHEREAS, these changes have been reviewed by the City Manager, the City Attorney, and City staff, 23 and been found to be in compliance with the directives from this Board; 24
NOW, THEREFORE, BE IT ORDAINED BY THE BOARD OF DIRECTORS OF THE CITY 25 OF LITTLE ROCK, ARKANSAS: 26
Section 1. The City of Little Rock Non-Uniform Employees Defined Benefit Pension Plan and Trust 27 is hereby adopted, effective January 1, 2014, using the specifications attached as Exhibits A and B to this 28 Ordinance. 29
Section 2. The City of Little Rock Non-Uniform Employees Defined Contribution Plan and Trust is 30 hereby amended, effective January 1, 2014, and adopted as amended using the specifications attached as 31 Exhibit C to this Ordinance. 32
Section 3. The employees eligible to participate in the new Defined Benefit Pension Plan shall agree 1 to reduce eligible compensation as set forth in the attached specifications, beginning with the pay period 2 beginning December 28, 2013, which is to be paid after January 1, 2014. 3
Section 4. The City of Little Rock will assume the obligation to pay the amounts deducted from such 4 employees' pay and shall contribute such amounts to such employees' retirement plan. 5
Section 5. Such amounts are intended to be "picked up" by the City of Little Rock and thus are intended 6 to be nontaxable to employees for federal and state income tax purposes. The term "picked up" is used in 7 reference to the Internal Revenue Code that provides that for any plan established by a governmental unit, 8 where the contributions of employing units are designated employee contributions, but the employer 9 actually contributes ("picks up") such amounts, the contributions are treated as employer contributions and 10 thus can be nontaxable for the employee. 11
Section 6. Severability. In the event any section, subsection, subdivision, paragraph, subparagraph, 12 item, sentence, clause, phrase, or word of this ordinance is declared or adjudged to be invalid or 13 unconstitutional, such declaration or adjudication shall not affect the remaining provisions of this 14 ordinance, as if such invalid or unconstitutional provision were not originally a part of this ordinance. 15
Section 7. Repealer. All ordinances, resolutions, bylaws, and other matters inconsistent with this 16 ordinance are hereby repealed to the extent of such inconsistency. 17