MLGW Increases Pension Contribution by $11 million
Memphisshelbyinform is determined to keep the public informed about local public pensions, OPEB (retiree health care and life insurance) and public employee benefits. This is a big job, but here is some information about the MLGW pension system.
- The valuation summary for the year ending January 1, 2009 states that due to market losses, the MLGW (read that as you, the rate payer) will have to kick in an extra $17 million dollars.
- This was later reduced to an extra $11 million as shown on the MLGW minutes.
- The MLGW pension rules allow a pension to go to 82.5% of final average earnings at, in this case, an age of 55 years. (See several examples of this in the MLGW minutes) This early retirement age and the high percentage of the highest one year salary earnings are several of the big high cost factors of public pension systems. NOTE: The pension rules concerning the normal three year average earnings were changed in March 2005 in certain cases to the highest two year or one year earnings and contributed to this high pension cost.
What does this mean to you the rate payer? It means a continued high cost of MLGW rates. The higher contribution for the pension plan shown above also shows the vulnerability and potential liability of our pension systems to market forces over which we have no control. Remember this is a legally enforceable obligation of Memphis and Shelby County rate payers enforceable through your utility bills.
Shelby County is now looking at a proposed new pension system which, hopefully, will be at a lower cost. Joe Saino is on that review group. As far as we know, MLGW and the City of Memphis are not doing a similar review. We will keep you informed.