By Kaitlin Fleming
The Gadsden City Council may soon vote on a new benefit plan for city employees that may see those same workers pay an additional 1.5 percent from their paychecks, according to city council members.
On Monday, May 20, councilmember Deverick Williams suggested during a finance meeting that it would be better to pass a resolution that would adopt an updated retirement plan, in line with newly passed state law SB147, without informing employees about the upcoming change.
Council President Cynthia Toles agreed, saying an announcement would “create confusion” for city employees and leave them “rushing” city offices for more information. Councilmember Kent Back seemed reluctant in a later interview when he agreed with Toles’ and Williams’ prediction.
“I’ve only been at this for six months,” said Back. “So, I don’t know everything. The council thinks this will create confusion and I am inclined to believe them. They’ve been through things like this before.”
The new plan is informed by a new state bill that Governor Kay Ivey signed into law on May 2. The bill will affect full-time employees on the Retirement System of Alabama (RSA) plan and change them from a Tier 2 to a Tier 1 employee, meaning more benefits for the employee but more money taken from his or her paychecks.
The City of Gadsden uses the RSA plan and adopting the change allowed in this bill is an optional move for the city, as the law does not require any entity using the RSA to take any action at all.
With the current system, the city pays 19.19 percent of a Tier 1 employee’s wages toward a retirement plan and the employee pays 7.5 percent, unless the employee is a police officer or firefighter; the employee then pays 8.5 percent. With a Tier 2 employee, the city pays 17.77 percent and the employee pays 6 percent, unless the employee is a police officer or firefighter, then the employee pays 7 percent. This was the most current plan with the RSA until the passing of SB147.
Apart from the monetary differences in retirement packages, there are differences in retirement options.
Tier 1 employees have the option to serve for 25 years before retiring or they can serve for 10 years and retire at the age of 60. Tier 2 employees cannot retire after 25 years of service. Instead, they must work until they are 62 years old (or 56 if a police officer or firefighter) before retiring.
Another benefit to Tier 1 is that Tier 1 police officers and firefighters get an additional year added to their retirement pay for every five years they serve, meaning that a police officer can serve for 15 years and receive 18 years of retirement benefits.
As it now stands, the City of Gadsden lists the majority of its employees as Tier 1 and over 160 of its 500 full-time employees at Tier 2.
When the city adopts this optional resolution, it would cost the city roughly $67,000 more than it currently costs to pay retirement benefits to employees.
City Financial Director Lisa Rosser said that the city will pass the ordinance/resolution and Williams said the city council could be voting on it in a few weeks.
When asked how he would vote on the resolution, Back said he “couldn’t say for sure” but he anticipates it will pass.
If so, the city that uses over 70 percent of its $52 million dollar budget to pay payroll and retirement benefits will be looking at paying more money into retirement. In addition, employees themselves will be paying an additional 1.5 percent of their paychecks with no option to opt out of the plan.
During the finance meeting, Back asked for clarification on the differences between Tier 1 and Tier 2.
“If our children were city employees, would we want them to be Tier 1 or Tier 2?” Back asked the committee.
Finance Director Lisa Rosser said the benefits of Tier 1 are much greater than that of Tier 2.
“The City of Gadsden’s pay is not the best in the world but it’s because of our benefits,” said Rosser. “Benefits are a package. When we hire someone, benefits are almost 50 percent of that package depending on pay. We can’t afford to pay more because our benefits are so high. We’re paying almost 20 percent, the city is, into retirement plans. We pay 80 percent for insurance premiums. So we can’t increase pay. There’s not the money there to do it.”
Williams added that there are people who could argue that the city is paying too much in benefits.
“There’s a very strong argument to be made that that retirement benefit is too rich for us,” said Williams. “I’m not a proponent of taking that away. That’s how we keep the people that we do keep.”
After discussion on the benefits of the change, Williams summarized the council’s next steps.
“Legal (City Attorney Lee Roberts) will need to go ahead and draft the ordinance,” said Williams. “Then we’ll need to pass that legislatively and then send it to RSA for approval. And we do not need to do any communication [with employees] until we’ve gotten that approval from them.”