14 - RAISES FOR RETIREES - Laserfiche WebLink

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Item No. 14 memorandum TO: Mayor & City Council FROM: John Godwin, City Manager SUBJECT: RAISES FOR RETIREES DATE: August 21, 2017 BACKGROUND: We all agree this is a very important issue for a number of our former employees. For those who retired a number of years ago, raises after retirement were apparently common, so those retirees became accustomed to receiving them, which I fully understand. Also, at one time TMRS was financially much healthier than it is today, and often issued a "thirteenth" check each year to its retired members from surplus funds, so members got used to that too. However, over time, and in the face of so many retirement systems across the country going broke, TMRS realized it needed to change its actuarial basis to ensure it would be financially sound for years to come. Part of that was increasing contributions from member cities, including Paris, to ensure actuarial soundness. The good news is that TMRS is now a high quality, financially sound retirement system. Employees contribute 6% of their pay and the city doubles that amount. Participants can retire in as little as twenty years. I believe anywhere in Texas that is a good system, and I think many people in Paris would be quite happy to be able to participate in such a plan. In addition, a unique benefit offered to retired city employees under 65 years of age is a continuing health insurance plan for which we pay $6,000 per year per retiree. The city has 104 current employees potentially eligible for this benefit. We budget $125,000 to pay for it. The ad hoc retiree COLA being considered only benefits those who have been retired for over a year. No current employee would benefit from the ad hoc raise when they retire in the future, so such a move would not help current employees, or help us in recruiting. Current employees would only benefit if the city adopted an annually repeating COLA option, which I think we all agree is simply too expensive (and would require a significant tax rate increase). As to guarantees made to former employees, I have been told by Finance Director Gene Anderson there were no guarantees made to employees about future raises. Certainly a city council cannot legally obligate a future council in that way; every budget stands on its own.