This report is somewhat dated now but the research and analysis behind it is solid and it still has a great deal of information useful to all interested parties. Since the report  was published, the City implemented the Defined Contribution (DC) Pension Plan for all newly hired employees, while most of non-sworn employees hired before the DC plan was implemented are still in the Defined Benefit (DB) Pension Plan. As the report shows, both of these plans are in need of improvement which we have pushed for for over 3 years. However, because of the terrible shape of the City's finances when Mayor Franklin was elected, pension plan improvements have been delayed.  We are committed to keeping this vital issue before City leaders in the future.

 

The following report from the Pension Task Force was presented to the Atlanta City Council Finance/Executive Committee by P.A.C.E. Political Action Committee and Task Force chair Randy Bundy on Wednesday, October 31, 2001.  The Executive Summary, which outlines the key points, is presented first followed by the report.

City of Atlanta Pension Task Force
Executive Summary

 GOALS FOR PENSION PLANS:
·        Value long term employees
·        Retain institutional knowledge
·        Attract and retain qualified “good” employees
·        Create a retirement system that represents equitably all groups of employees

 CHANGES TO EXISTING PENSION PLANS:

	Tiered pension plan retroactive: 3.25% Multiplier First $0-$20,000 3.00% Multiplier Next $20,001-$40,000 2.75% Multiplier Next $40,001- and higher
	Tiered plan capped at 90% of employee’s highest average annual salaries
	Tiered plan to be tied to the COLA (Urban Atlanta Index)
	Permanent 75 Rule (combination of age and years of service)
	10 years of service for full vesting in pension plan (5-10 vesting)
	Age 55 retirement without penalty for vested general employees
	Age 51 retirement without penalty for vested Police and Fire employees
	Rescind existing defined contribution plan - (read more here)
	Gradual reduction in employee pension contribution

 RECOMMENDATIONS:

·        Salary adjustments: 
o       Cost of Living Adjustment (COLA) performed annually
o       Competitive salaries with Atlanta area local governments

·        Consider participation of all employees in Medicare Benefits

·        Adjust Health Benefits back to 75% of Medical Plan selected by employees to be competitive with other local governments

·        Look at Disability Benefit Issues and Legislation Needed to Protect City Workers

·        The Pension Task Force is in Support of a Distinction between Catastrophic Disability and other Levels of Disability.  Toward that end, the Pension Task Force Supports Recent Ordinances that Recognize this Distinction and Recommends that these Standards and Definitions used for Members of the Police Officers Pension in 01-0-0976 be Applied to all Three City of Atlanta Pension Plans

·        Recommends that the City of Atlanta re-instate the Veterans Benefits option so as to allow employees to buy back their military service for up to four years if they served during periods of hostility

 

City of Atlanta

Pension Task Force

2001 Report

In July 2001, the Atlanta City Council and the Mayor created a task force for the purpose of reviewing the City’s pension plans and developing recommendations for the overall improvement of the plans and for other purposes.  While it is generally recognized that the City’s pension plans needed to be updated and enhanced, some analysis was needed to establish the specific improvements needed.

 The Pension Task Force is comprised of 17 members appointed in the following manner

	The President of the Atlanta City Council, or his designee
	The Chair of the Finance/ Executive Committee or his designee
	Chief Financial Officer, Chief Operating Officer, and the Commissioner of Personnel and Human Resources
	One representative from each of the three (3) Pension Boards, to be appointed by the respective Boards
	One representative from A.F.S.C.M.E.
	One representative from the Firefighters Union (I.A.F.F.)
	One representative from P.A.C.E. General Employee Union Members
	One representative from the Police Union International Brotherhood of Police Officers (I.B.P.O.)
	One representatives from the Police Benevolent Association (P.B.A.)
	The chairperson of the Civil Service Board
	Three citizen representatives- one to be appointed by the Mayor, one to be appointed by the President of Council and one to be appointed by the City Council. Each representative shall have knowledge of finance generally, and/ or pension plans, specifically.

A Perspective for Change

The Pension Task Force initially met on August 29, 2001, and had weekly meetings thereafter through October 26, 2001.  The Task Force elected Randy Bundy as the chair, and Lou Arcangeli (since retired) as the vice-chair.  Sub-committees were appointed and the Task Force began its work.  It was decided that core goals needed to be established.  To that end, the following core goals were created:

 Ø    Value long term employees

Ø    Retain institutional knowledge

Ø    Attract and retain qualified “good” employees

Ø      Create a retirement system that represents equitably all groups of employees

 

In order to guide the City toward these goals, the Task Force discussed the reasons for having a pension plan and for making upgrades and enhancements to the pension plans.  These reasons include the characteristics for having an effective pension plan, meeting the needs of the City and of the employees.  These are the following:

 

 Reasons to Modernize our Pension Program

 1.  Investment in Human Capital:  The City must recognize the importance
in maintaining an attractive pension plan as part of an investment strategy in
managing it’s human resource capital.

 2.  Recruiting the Best Workforce:  An appropriate and fair pension system will help attract increasingly savvy employees who are evaluating the employers “total compensation package” before making an employment commitment.

 3.  Retaining Institutional Memory:  A competitive retirement plan will assist in retaining excellent employees who are in the early and mid part of their career. Without this incentive the City will not be able to build and maintain a depth of employees with “institutional knowledge” critical to successfully managing operations. 

 4.     Stable Plan Management:  A modern retirement program will eliminate the need for unplanned “early out” programs. These sudden windows force employees to choose or loose special benefits.  They also don’t allow the City to plan for a smooth transition of retiring staff to ensure continuity of mission critical programs.

 5.  Succession Planning:  The City can better plan for succession of employees as retirement approaches.  This partnership with employees will protect the citizens ensuring replacement staff is constantly ready fir service delivery.

6.     Employee Retirement Planning:  The employees can better plan for their retirement, and the economic protection and security of their families. (As compared to a temporary, short window early out program).

 7.      Health of Pension Plans: Insure that the three pension funds are fiscally sound and in compliance with conservative and long-range actuarial goals.

 

The Challenge

 The last significant improvement to the City of Atlanta pension program was in 1978.  Except for the improvements to the Police Officers and Firefighters Pension Plans in 2001, there have been no enhancements to the plans.  During this time, surrounding local governments have made steady improvements to their pension plans to stay competitive with both government and private sector benefits in competing for an increasingly skilled and mobile work force.  Atlanta’s pension plans are no longer competitive and do not provide sufficient incentive to attract and retain the best workers and to retain institutional knowledge.

When compared with cities and counties of comparable size, Atlanta’s pension plan for general employees ranks very low.  In fact, when comparing the years of service multiplier for calculating individuals’ pensions, the minimum age for a full pension, and the active employee’s contribution to the pension fund, we find that the City of Atlanta Employees contribute more and receive much less.                                 

                                         

 

 

 

 

 

 

 

 

 

 

NOTE:   During the first five years, the multiplier is 2.25% then increases to 2.50%.  Newly hired employees and those so electing are under the defined contribution pension plan.

 

 

 

 

 

 

 

 

The Health of the Pension Funds

 According to actuarial reports, the City’s three pension funds –General, Police and Fire,  (as of this report), are currently sound, but do need overhauling and state of the art enhancements.  However, Pension Fund Trustees serving on this Task Force expressed concerns that recent actions will have the effect of increasing contributions by future employees and citizens.

 

Pension Plan Changes and Recommendations

 

The Task Force met weekly for nine weeks and discussed remedies and developed recommendations for improvements.  These recommendations include a fee of approximately $15,000.00 for actuarial analysis for all three pension plans, General, Police and Fire.  A letter was generated to Council Member Lee Morris requesting assistance in identifying funds for the actuarial analysis.

The recommendations are therefore presented without actual cost figures because the actuarial analysis has not been completed as of the date of this report.  The following represent the approved pension plan changes:

 

Approved Pension Plan By Pension Task Force

Tiered Pension Plan Retroactive:

o       3.25% Multiplier First $0-$20,000

o       3.00% Multiplier Next $20,001-$40,000

o       2.75% Multiplier Next $40,001- and higher

	Tiered plan capped at 90% of employee's highest average annual salary (based on 36 months)
	Tiered Plan to be tied to the COLA (Urban Atlanta Index)
	Permanent 75 Rule (combination of age and years of service)
	10 years of service for full vesting in pension plan (lower from 15 years; 5-10 vesting)
	Age 55 retirement without penalty for vested General Employees
	Age 51 retirement without penalty for vested Police and Fire employees
	Rescind existing defined contribution plan - (read more here)
	Gradual reduction in employee pension contribution

The Task Force further considered that certain features were of higher priority than others and that the features could be phased in over three years as follows:

 Prioritization of New Pension Plan Features

 BUDGET YEAR ONE

	Discontinue defined contribution plan (make optional)
	Tiered plan with 80% cap of highest annual salary and retroactive for all City of Atlanta employees with COLA adjustment
	Rule 80 for all city of Atlanta employees

 BUDGET YEAR TWO

	Lower age of retirement without penalty from 60 to 55 years for employees of the general employees pension fund
	Lower age or retirement without penalty from 55 to 51 years for police and fire employees pension fund
	Raise pension cap to 85% of highest annual salary

BUDGET YEAR THREE

	Lower vesting from 15 years to 10 years of service (5-10)
	Raise pension cap to 90% of highest annual salary

 

In addition, the Task Force made other recommendations concerning benefits that directly affect the pension program that are in support of its goals but are not directly tied to the improvements in the pension plans.  Those recommendations are as follows:

Salary adjustments:

o       Cost of Living Adjustment (COLA) performed annually

o       Competitive salaries with Atlanta area local governments

Consider participation of all employees in Medicare

	Adjust health benefits back to 75% of any medical plan selected by employees to be competitive with other Metro area jurisdictions
	Look at disability benefit issue and legislation needed to protect city workers
	The Pension Task Force is in support of a distinction between catastrophic disability and other levels of disability.  Toward that end,  the Pension Task Force supports recent ordinances that recognize this distinction and recommends that these standards and definitions used for members of the Police Officers Pension in 01-0-0976 be applied to all three City of Atlanta pension plans.
	Recommends that the City of Atlanta re-instate the military veterans benefits option so as to allow employees to buy back their military service for up to four years if they served during periods of hostility

 

 APPENDIX

Comparative Pensions 4 cases in(as of 12/31/2000) 4 different plans in the Metro area
	City Plan	DeKalb Plan	Cobb Plan	Fulton Plan
	Age 55	Age 55	Age 55	Age 55
%Benefit Amount vs.City	---	+53%	+39%	+32%
%Employee Contributes	7%	0.5%	4%	6%
Payroll Clerk-retires at->	$11,846.70	$18,099.13	$16,453.75	$15,631.06
based on annual salary of: $26,326
Years of Service:25
Electrician -retires at->	$17,095.50	$26,118.13	$23,743.75	$22,556.56
based on annual salary of:
$37,990.00
Years of Sevice:25
IT Analyst - retires at->	$21,469.95	$32,801.31	$29,819.38	$28,328.41
based on annual salary of:
$47,711.00
Years of Sevice:25
Chief Civil Eng. -retires->	$30,217.95	$46,166.31	$41,969.38	$39,870.91
based on annual salary of
$67,151.00
Years of Sevice:25

Note: The City of Atlanta retiree receives no social security benefits.  Employees in the other jurisdictions would receive social security in addition to these pension plan benefits.

Comparison of Local County Govt. Pension Plans with the City of Atlanta as of 9/05/2001
Pension Benefit Plans
					Employee	Years to	Normal	Year
	Retirement Plan	% per Year	Medical?	Life Ins.	Contribution	Vest	Age	Estab.
---------------	------------------------------------------------------------------			------------	-------------------------------------------
Atlanta	Age 60	2.00 for General	YES	$      5,000	7.00%	15	60	1978
	Mandatory DC	3.00 for Police	75%
	No Social Security	2.00-3.00 for Fire	of least
	3 Funds	80% Cap for Police	plan
Cobb Co.	Rule 80	2.50	YES 85%	$10,000	4.00%	7	55	1998
	Social Security	No Cap	any plan
	One Fund
DeKalb Co.	30 years/82.5%	2.75	YES	$      5,000	0.50%	10	55	1998
	One Fund	Considering 3.00	70%
	Social Security	82.5% Cap	any plan
Fulton Co.	Rule 80	2.25% First 5 years	YES ?	$      5,000	6.00%	10	55-60	1991 and 1999
	Mandatory DC	2.5% After 5 years
	Social Security	No Cap
	One Fund
Gwinnett Co.	Rule 75	2.00	YES 85%	$    20,000	3.50%	3	55	1994
	Option of DC	No Cap	any  plan
	One Fund
	Social Security
How Do We Compare?:
1 -	City has the longest vesting schedule - 15 years
2 -	The City is the only major metro  government employer to base target retirement plans on age,
	rather than on years of service or in combination with age
3 -	City has the lowest rate of percentage per year of service (Behind Cobb, DeKalb, and Fulton Counties)
4 -	City has the highest employee contribution rate (14 times higher than DeKalb County)
5 -	Normal retirement age is highest with the City - 60 years
6-	City does not participate in social security - All others are in social security
7 -	City has oldest plan - the City should be a leader and first, not last in every category

 

CPI-U source: U.S. Dept. of Labor Series CWURA319SA0,CWUSA319SA0, All items, Area=Atlanta,GA 
US Workers source: U.S. Dept. of Labor Series EEU00500006
City of Atlanta based upon a composite of 8 different job classes at  pay grades 9, 11, 13, 17, 21, 24, 27 and 35

 

DB (Defined Benefit) Plan with 3 steps

The first $20,000 of average annual salary is computed at 3.25%
From $20,001 to $40,000 is based on 3.0%
All above $40,000 is at 2.75%

Calculations are based on 25 years of employment and no age penalty at retirement.

Avg. Annual Salary    Multipliers    Total Retirement Salary    % replacement

$20,000 @ 3.25%          .8125 * 20,000 =       $16,250                    81.25%

$30,000

1st 20,000 (3.25%)       .8125 * 20,000 =        $16,250
2nd 10,000 (3.0%)        .75 * 10,000      =      +$ 7,500 = 23,750        79%

$40,000

1st 20,000 (3.25%)       .8125 * 20,000 =       $16,250
2nd 20,000 (3.0%)        .75     * 20,000 =      +$15,000 =31,250         78%

$50,000

1st 20,000 (3.25%)        .8125 * 20,000 =     $16,250
2nd 20,000 (3.0%)         .75     * 20,000 =      $15,000
3rd 10,000 (2.75%)       .6875 * 10,000 =    +$ 6,875 = 38,125          76%

$60,000

1st 20,000 (3.25%)        .8125 * 20,000 =      $16,250
2nd 20,000 (3.0%)         .75     * 20,000 =      $15,000
3rd 20,000 (2.75%)        .6875 * 20,000 =   +$13,750 = 45,000         75%

$70,000

1st 20,000 (3.25%)        .8125 * 20,000 =    $16,250
2nd 20,000 (3.0%)         .75     * 20,000 =    $15,000
3rd 30,000 (2.75%)       .6875* 30,000 =   +$20,625 = 51,875         74%

$80,000

1st 20,000 (3.25%)        .8125 * 20,000 =   $16,250
2nd 20,000 (3.0%)         .75     * 20,000 =    $15,000
3rd 40,000 (2.75%)        .6875* 30,000 =  +$27,500 = 58,750         73%

Note 1:  These figures reflect a 10% age penalty for the City of Atlanta worker.  Employees in the other jurisdictions would not incur any age penalty under the conditions in this example.

Note 2: The City of Atlanta retiree receives no social security benefits.  Employees in the other jurisdictions would receive social security in addition to these pension plan benefits.