HomeMy WebLinkAboutA001 - Letter from Harold Ault, concerns about chaging Utility Retirement System from defined benefit to defined contribution Mayor and Members of Council :
I am writing to express my concern with the ordinance for the
conversion of the Utility Retirement System from defined benefit to
defined contribution.
There is a major issue that remains unresolved and the process for
resolving it is not clear at this time. The issue is distribution
of funds in the Utility Retirement System to give each member a
roll over amount into the defined contribution system.
Before a vote of the Utility Retirement membership was taken on the
conversion issue, members were given a proposed roll over amount.
They were told that this amount would give the same or greater
retirement benefit under a defined contribution plan than they
would receive under the present defined benefit plan. It is
difficult for members to compare the two systems with all the
assumptions made and projections into the future.
A few months after the vote, someone more familiar with retirement
calculations told me my roll over was not large enough to give the
same benefit, I finally realized that those members who would have
reached age 55 with 30 years of service will have to work to age 65
under the defined contribution plan in order to receive the same
benefit as under the present system. In my case this means
receiving a roll over of about 67% of that needed to give the same
benefit and working nearly ten years longer. There is a group of
members in same position.
Members who have reached age 55 are being given the same benefit as
if they had retired under the present system on the day of
conversion. If you are not age 55 at the time of conversion, you
can easily receive over $100, 000 less in roll over amount. There
will be one member five months short of age 55 at the time of
conversion. Another member will have 32 years of service, but be
three years short of age 55 . The vote to change to a defined
contribution plan was never represented to be a change in benefit
formula, but it is turning out to be just that.
I have written to the Utility Retirement Board, but they do not
want to deal with the issue until after the cost of the annuities
is known. This was supposed to be estimated several months ago.
The latest schedule for conversion shows it to be in mid-September
with a conversion date of September 30, 1997 . This leaves little
time to resolve the issue, especially when it is to be done by
council resolution.
The issue is further complicated by the conversion also changing
the voting representation of the Board. Most of the members
affected by the lack of consideration being given to age 55 and 30
years of service are concentrated in the representation of two
members of the Utility Retirement Board. Neither of the two new
voting members will represent any of the age 55 and 30 years of
service people.
It has been difficult to determine exactly how the roll over
amounts are being calculated and if they are correct. The Director
of Finance has refused to reveal the roll over amounts . I asked
the Utility Retirement Board to check with the City Attorney for a
determination if this is public information. The assets of the
Utility Retirement System belong to the members, and I believe they
have a right to know how they are being distributed.
Therefore, I am requesting the Ames city council take the following
action:
1 . Delay the conversion date by two weeks to October 15, 1997 to
allow more time to determine how much money is available for
distribution.
2 . If ( 1 ) above is not adopted, have two roll overs . The first on
September 30, 1997 based on present value and a second of the
remaining funds, but delay changing the number of voting Utility
Retirement Board members until the existing board has completed the
conversion process . This assumes that there will be enough given
to the 55 and 30 people to increase them from 67% whole to at least
85% whole while other members are 100% or more whole.
3 . Have a public hearing on the distribution of funds .
4 . Direct the Utility Retirement Board to make all the roll over
calculation criteria and amounts available to the members .
I am enclosing copies of two letters I have written the Utility
Retirement Board.
AUG 2 6199
E
C11Y CF OEM 101NA