Council considering 2 ordinances today
People enrolled in the retirement system for New Orleans city workers would start paying more in pension contributions over the next two years, and the formula used to determine the size of their benefits would change, under separate measures set to go before the City Council today.
New Orleans City HallThe proposed ordinances, geared toward helping the city rein in its fast-rising benefits costs, are sponsored by Councilwoman Stacy Head. The trustees of the pension fund voted Wednesday to support them.
Under the first proposed ordinance, employee contributions into the New Orleans Employees' Retirement System fund would rise from the current 4 percent of a worker's pay to 5 percent in 2012 and to 6 percent in 2013.
A second ordinance would change the formula used to calculate a retiree's monthly benefits package. Currently, pension payments are based on an average of each member's highest salary over 36 consecutive months of his or her employment. If the ordinance passes, pension payments will be calculated based on the highest 48 months of salary starting in 2014, and the highest 60 months starting in 2015. The result is likely to be lower benefits for many workers.
At the end of last year, the employees' system had 2,469 active members, as well as 1,885 retirees and survivors receiving benefits, and 120 members participating in the city's deferred retirement option plan, according to figures from the council's Special Pension and Retirement Committee.
In recent years, public pension systems have imposed increasingly heavy burdens on taxpayers across the country, with public contributions to pension funds soaring even as the share covered by workers often remained steady. Reforming the systems has quickly become a hot-button political issue.
At the end of 2010, the New Orleans employees' pension fund had $334 million in assets, up from $310 million the year before, according to an audit released in August by the firm Luther Speight and Co. Based on payroll data, the city's annual obligation to the plan for 2011 was $20.9 million, with employees kicking in $3.4 million, according to an August letter from fund board chairman Edgar Chase III to the council.
Head, the chairwoman of the council's pension committee, described the measures up for approval today as "small changes now that are logical and are appropriate." She said officials are looking to make changes to the fund now to prevent problems down the line.
"We need to be thoughtful now to make sure that we don't end up in a bad situation seven to 10 years from now," Head said in an interview.
The council has hired the consulting firm BCS Placements to evaluate the city's pension system. Officials are also reviewing the types of investments that the city's funds make, though no proposals to change them are currently on the table.
The city's pension funds for firefighters and police, which were created by state law, would be unaffected by the proposed ordinances.
City officials have been working with overseers of the Firefighters' Pension and Relief Fund to control its costly pension benefits, which a top official in Mayor Mitch Landrieu's administration has described as "one of the most serious challenges that we face as a city."
Chief Administrative Officer Andy Kopplin said this month that city officials have met with representatives of the firefighters' fund over the past year to discuss ways to reduce its liabilities.
Richard Hampton, the CEO of the fund, estimated that the city is behind by about $44 million in its obligations to the fund. Hampton said he thinks members of the system would be willing to work with the city, even if that means increasing employee contributions or reworking the pension formula, if the city is willing to start catching up with its past obligations.
"I think that's a practical way to approach it, and I would hope our discussions, if we were going to go in that direction, would be similar to what the city is doing," Hampton said. "I think the firefighters would be amenable to doing what's right for their pension fund, but they also have to have a sense that the city's going to do what it has to."
Richard Thompson can be reached at rthompson@timespicayune.com or 504.826.3496.