Having worked for months to come up with a plan that could save the city tens of millions of dollars each year in pension payments to employees, Atlanta is now set to spend nearly $1 million to educate those workers about their retirement plans and financial management.
But some are wondering whether that is going to be enough.
Two companies have been hired to help the city's 7,000 workers navigate through the cumbersome maze of their new retirement structure.
The heart of the plan requires all current police officers, firefighters and general employees to take a 5 percent pay cut in the form of a higher pension contribution. It also reduces the multiplier used to calculate pension benefits of future workers to 1 percent and reduces the maximum cost-of-living adjustment of pension benefits of future employees to 1 percent.
Workers have until Oct. 31 to decide whether they will remain in the defined benefits plan or transition to a new hybrid plan that is a combination of a reduced traditional plan and a 401(k)-type plan. The changes will take effect Nov. 1 and be reflected in their Nov. 18 paychecks.
“A key tenet of pension reform is shared responsibility, and that requires employee education,” Human Resources Commissioner Yvonne Cowser Yancy said. “... We are trying to ensure that as employees prepare to make their one-time election, they are making an informed decision.”
Gina Pagnotta, president of the Professional Association of City Employees, welcomes the training but wonders whether it will do any good for a bulk of the workers still cautious about shifting out of the familiar defined benefits plan.
“"I just don’t feel that the employees -- including myself -- are educated enough," Pagnotta said. "For me, it might be better to go into the hybrid plan, but I will probably be more comfortable just staying with the defined benefits plan. I am not educated enough and want that responsibility. This is something that takes years to learn.”
As Atlanta struggled to restructure its pension system one of the basic charges lodged against the city was that workers did not understand the difficult formulas that were being used to make the changes.
“It was obvious that the workers didn’t understand what was being offered to them and I told the mayor that,” Councilwoman Joyce Sheperd said. “One of the commitments of the mayor and Human Resources made was to resolve that. This is a good starting point. I can’t say what the end results will be.”
Joshua Franzel, vice president of research for the Center for State and Local Government Excellence in Washington, D.C., said one thing that Atlanta will have to guard against in its training is that one size does not fit all workers.
“I have seen financial literacy programs tailored to various segments of the workforce,” Franzel said. “It all depends on how it is structured. Tailoring it to a specific segment makes sense.”
Yancy will also hire a full-time adviser in her office to deal directly with employees regarding their concerns.
“We want to create a culture of financial wellness beyond pension reform,” Yancy said. “We will continue to have active dialogue with our employees.”
In June, after months of debate and fights, the council passed sweeping changes to retirement benefits for city employees while shrinking pension liabilities, establishing a 401(k)-type plan for workers and requiring them to give more out of their checks toward their pensions. Actuaries say it will save Atlanta $270 million over the next decade and more than $500 million over the next 30 years.
The companies will start Sept. 19.
NTRC will offer individual financial counseling to workers. It will be paid $225,000. The Ayco Co. will provide group workshops covering general financial education, as well as produce individual statements and materials for every employee, provide a call center manned by licensed professionals, and set up a website with online tools. Ayco will get $700,000.
“Any time we can get our employees educated about the pension plans is a great thing,” said Alfred Berry Jr., a city analyst and chairman of Atlanta’s General Employee Pension Board. “We need to be well-versed on the different plans that the city offers, whether it is defined benefits, defined contributions or a hybrid. We need to know what we can expect on retirement.”
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