Pension Report Season

I reported last week that the City of Memphis put off addressing needed pension reforms until December 6th, 2011. They are waiting for the results of the June 30, 2011 actuarial report.

Well a similar report is in for Shelby County. It is interesting to show some of the report results. First some background. The County has already reformed their system by instituting Plan D for all new employees. They recognized that Plan C was too expensive and that they needed to bend the cost curve down for the future. Their actuarial assumption for future returns was 8.25% which they changed to 8%. (If you assume a lower rate of annual average return, you must contribute more to the pot). As part of the reform, the contribution from employees for Plan A and Plan C will be increased from 6% to 8% at a 0.5% annual increase over 4 years.

The market value of the assets increased by $156 million dollars over the year ended June 30, 2011, a good rate of return. However we were coming off a depressed market. In spite of a good year for market returns, the actuaries recommend an increase in the annual contribution of around $2 million dollars.

What does this mean for the City of Memphis. Well, we will have to see the report. However consider these facts.

Shelby County is nearly fully funded. Memphis is underfunded by $530 million dollars.

Shelby County has 3056 retirees and survivors. Memphis has 4525.

Memphis has 648 disabled retirees, Shelby County has 109. And all of this from an active workforce that is nearly equal. Let us hope and pray for reform.


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