The Conway City Council will consider changing the non-uniform pension plan for city employees in order to avoid it becoming depleted.
“In 2033 or 2034, assets will be depleted,” Danny White, a representative from the city’s retirement company, told the council on Tuesday. “You have an obligation to pay benefits.”
If the fund was depleted, the city would have to pay the benefits out of pocket from the general fund.
Conway’s Chief Financial Officer Tyler Winningham recommended the council approve a new plan.
“There’s no immediate danger of anything happening right now but a change does have to be made,” he told aldermen, adding that it would cost the city $1.6 million per year to change nothing.
If approved, the new plan would go into effect Jan. 1, 2019. Any employees who have been with the city for five or more years when the changes go into effect will be “grandfather in” to the old plan, Winningham told the Log Cabin Democrat on Wednesday.
“There are a lot of changes,” he said, noting that 133 of the city’s 251 employees have fewer than five years of service as of Jan. 1, 2018.
Under the current plan, employees contribute 6 percent, the city contributes 6 percent and the rest comes from property tax proceeds. In 2017, the employees 6 percent and the city’s match each amounted to $500,000-$550,000. The property tax proceeds were around $400,000.
The plan is currently 33 percent funded and the city will aim to get it 80 percent funded with the changes.
“Obviously you’d like to be 100 percent funded,” Winningham said.
Under the proposed new plan, employees would pay in 10 percent, which the city would also match. The current vesting period is 10 years, but would drop to six years under the new plan.
The new plan proposes a retirement benefit of 2 percent times years of service times the average pay of the employee’s final five years instead of the current 50 percent of pay based on annual salary at date of retirement.
To be eligible currently, an employee who is 60 or older needs 10 years of service or 20 years of service at any age. The new plan would allow employees who are 65 or older with six years of service or employees aged 62-64 with 20 years of service or employees with 28 years of service at any age to qualify.
The new plan increases the spousal benefit, Winningham said.
Instead of $50 a month upon their death, a city employee’s spouse would receive 50 percent of a retiree’s benefit.
Mayor Bart Castleberry said the problem was brought to his attention when he first took office.
“It’s something that we can’t continue to put off,” he told aldermen Tuesday.” We have some real issues that this council is going to have to deal with.”