Non-pension retirement benefits for Westport employees reviewed
Updated 5:55 pm, Tuesday, August 21, 2012
Westport appears close to adopting its first defined-contribution retirement savings plan for town employees, as several members of the Representative Town Meeting's Finance and Employee Compensation committees signaled their support for that benefits option -- in place of pensions -- at a joint meeting Monday night.
The prospective plan would cover non-union and Department of Public Works employees hired after Jan. 1, 2012. A flexible contribution scale arguably comprises the plan's signature feature. New non-union employees would have to allocate at least 3.5 percent of their annual base salaries to a defined-contribution plan, a contribution that would be matched by the town.
After making that initial 3.5 percent allotment, non-union hires could then elect to make additional allocations in half-percent increments, which could bring their total defined-contribution plan contributions to as much as 7 percent of their annual salaries. The town would also match the optional, higher contributions, meaning that non-union town employees could contribute as much as 14 percent of their annual base salaries for the retirement savings accounts.
"The goal is to get away from a defined-benefit plan onto a defined-contribution plan," instead of the pensions that have been standard for most municipal employees' retirement.
During the last year, town officials have acted to usher in defined-contribution plans for new town employees. In February, the RTM approved the elimination of pensions and post-retirement health-care benefits for new non-union employees. In April, the RTM accepted new contract terms for the town's public works union decided by a state arbitration panel. The state arbitrators' ruling called for newly hired public works employees to join a defined-contribution plan. In contrast, current Department of Public Works employees have pensions, which are funded by worker and town contributions.
New public works employees would have to direct 5 percent of their annual base salaries to a defined-contribution plan, the same percentage decided by state arbitrators. Unlike non-union hires, new public works employees could not make additional voluntary contributions that would be matched by the town.
The defined-contribution plan would also cover new non-union education employees. About 40 education workers are not members of a union. No more than a "handful" of new non-union education personnel will likely be hired during the next year, according to Board of Education members Elaine Whitney and Jim Marpe.
Indicating that education officials would be receptive to the enactment of a defined-contribution plan, Whitney said Tuesday that the education board "would love a greater degree of certainty in terms of annual costs and budgeting."
While the RTM may decide to approve contribution levels to non-union employees' retirement savings accounts different than the 3.5 percent to 7 percent range backed by First Selectman Gordon Joseloff's administration, a clear majority of the Finance and Employee Compensation committees' members appear to favor adoption of a defined-contribution plan for new non-union hires.
"Instead of wishing and hoping and trying to figure out the future, we're capping our liability yearly," Gil Nathan, District 9, said of the prospective advantages of a defined-contribution plan. "We know what it is every year. We can assume 7 (percent employee contribution rate) and wherever it comes in below that, that's money that goes back."
Board of Finance member Tom Lasersohn also expressed his support at Monday's meeting for a defined-contribution plan for new non-union employees.
"The problem with defined-benefit plans is they're like a 12-year-old with a chainsaw," he said. "If you're not really careful, you cut a leg off. And the nice thing about a defined-contribution plan is that it's like a plastic chainsaw. You can't really hurt yourself that badly."
But not all town officials are enthusiastic about the creation of a defined-contribution framework.
"I'm really at square one," said Don Bergmann, District 1. "I am not all comfortable with how we've gotten to where we've gotten."
The RTM Finance and Employee Compensation Committees did not vote Monday on the proposed defined-contribution plan. They are set to continue their review during another joint committee meeting, tentatively scheduled for Sept. 11.
The full RTM is scheduled to begin its review of the plan at an Oct. 2 meeting. A defined-contribution plan cannot be enacted without RTM approval.
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