Two years ago, Alpharetta switched from a traditional defined benefits retirement plan for city workers to a plan requiring an employee contribution.
Chamblee did it more than a year ago. Atlanta plans similar changes.
Roswell will soon join them, with officials in the north Fulton city mulling options following a vote by the City Council to prohibit new employees from entering the old plan.
“The defined benefit is a traditional plan that cities have been getting away from,” said Kay Love, Roswell’s city administrator. “We feel the need to make the change.”
The Roswell council on Monday approved a proposal to amend the retirement plan for new municipal employees. Under the amendment, employees hired on or after March 1 would be prohibited from participating in the Georgia Municipal Employees Benefit System (GMEBS) retirement plan. Employees who are already enrolled in the GMEBS plan will remain in the program.
Mayor Jere Wood and the council will decide on a plan for new workers in the near future. Councilman Jerry Orlans, who owns a local insurance company that consults on employee benefits packages, will lead the issue as liaison to the city’s administration and finance departments.
“We’re just trying to look at all options and be proactive for the future,” Orlans said. “Right now, we’re in great shape. But we don’t want to be caught like a number of other cities that got really behind on their contributions.”
Roswell’s pension costs have grown from $2.9 million in fiscal year 2010, to $3.5 million in 2011 and to a projected $3.7 million in 2012. The city says it has funded 83 percent of total pension liabilities, which include both current and future payouts.
Experts say a healthy retirement plan should be about 80 percent funded.
Roswell officials hope to avoid some of the same problems that have plagued a number of cities, including Atlanta. Atlanta’s pension reform panel recently revealed the city’s unfunded pension liability is about $1.5 billion, with 53 percent of it funded.
Instead, Roswell plans to follow the lead of cities like Dunwoody, Johns Creek and Chamblee, among others, in requiring new employees to make contributions to their retirement plans.
There might not be much choice, according to the Pew Center on the States. In a February 2010 report, Pew warned of the “trillion dollar gap” between what states had set aside to pay for retirement benefits and the price tag for those plans.
Pew noted that a number of states had already started to reduce benefits and increase employee contributions in an effort to control costs. “I think we’re going to see some similar changes” in cities, said Kil Huh, director of research at the center.
However, officials with the Georgia Municipal Association (GMA), which oversees the GMEBS fund for more than 280 municipalities, said only five have frozen defined benefit programs over the past couple of years -- including Roswell and Chamblee -- and five are considering the change, said GMA spokeswoman Amy Henderson.
Employees' rights advocates remain skeptical of efforts to cut back on defined benefits plans.
"Cities didn't fund them adequately in the beginning," said Charles Clark, executive director of the local chapter of the American Federation of State, County and Municipal Employees. "This is just another way of balancing the budget on the backs of workers."
Roswell officials promise to remain competitive for employees by offering a number of attractive retirement plans.
“We want to be the city employer of choice,” Love said. “But the bottom line is that cost is the determining factor in the end.”
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