What Happened
In recent contract negotiations with its police union, the town of North Haven, Connecticut, was able to redesign its benefit plans, moving new hires to a 401k instead of a defined-benefit plan.
Not Finished
The town also is looking at changing funding mechanisms to help pay for escalating costs in health benefits. This would include higher co-pays for hospital and doctor visits.
The Future
While current pension plans are relatively healthy, the concern is over future returns in the stock market, which would be mitigated by the move to a 401k. North Haven expects to save at least $110,000 in the first year alone.
401k Plan
Based on an employee’s contribution to their retirement plan, the town will provide a match of between five and ten percent.
What’s Next
North Haven plans to begin negotiations with other union employees including Fire, Public Works and others to implement similar retirement plans.
Other Cities
As reported previously by Gov1, the city of San Diego voted via ballot measure to move new employees to 401k pension plans. Last week, the city also reached a tentative agreement with labor unions on what the 401k will look like. The interim plan would provide new employees with a 9.25 percent match beginning this fall. Public Safety employees would receive an 11 percent match.
And last month, Gov1 reported that Palm Beach Gardens, Florida, was altering current police employee pension benefits rather than raising taxes. The changes being made will save the city $5.7 million over the next three years.
This story on Sioux Falls, South Dakota, notes that multiple options for lowering pension costs are on the table, including eliminating health insurance and replacing it with a monthly stipend.
Finally, Knoxville’s
proposed hybrid pension plan will cap the maximum annual outlay to employees in retirement, as well as COLA caps and other components to keep costs down.