Murfreesboro (TN) – A divided Rutherford County Commission decided Thursday night to return to offering existing pension benefits for future government workers after Commissioner Joe Frank Jernigan changed his vote.
Jernigan said he called for the new 11-10 vote to rescind a previous February decision he had voted for out of confusion. The previous 11-10 vote would have required future workers to contribute at least 5 percent of their income to a hybrid pension benefit that gave them flexibility to leave the government while keeping retirement benefits.
“I don’t know what I was thinking at that time,” Jernigan said during a Friday morning phone interview. “That’s just one of those slip-ups you make.”
Unlike the previous 11-10 vote, the elected officials did not debate the decision to rescind, but Commissioner Robert Stevens had plenty to say after the meeting about why he opposed returning to the pension plan for workers who would start after Oct. 1.
“It was disappointing because several committees studied the reform for months and recommended it pass,” said Stevens, a Smyrna attorney who has been known to advocate for an employee-contribution retirement benefit after the County Commission has voted in past years to increase property taxes that he opposed. “I am not sure what kind of precedent it sets to reconsider decisions made in prior months because someone was confused the first time it was voted on.”
The county’s existing pension plan uses tax revenues to contribute 12 percent of the worker’s pay toward the retirement fund, with workers vested after five years and being able to collect pension income after retiring, Stevens said.
The rescinded hybrid plan had proposed the county contribute 4 percent of the pay of future workers to a pension while those employees would have 5 percent of their pay go to the fund. The county in the rejected hybrid plan also would contribute 5 percent of what the future worker makes to a retirement account while the worker contributes 2 percent unless this new worker opts out, said Stevens, who hopes in time the majority of the County Commission will accept the hybrid plan.
“We’ll have to regroup and see if the will is there to reconsider,” Stevens said. “Those in the majority voted to add millions and millions of dollars to the county budget in the future.”
Those who favored rescinding included Commissioner Joe Gourley of Smyrna, who in February was unsuccessful in calling for deferring a vote to study the hybrid pension proposal for future workers.
“I think we need more education on the whole thing on what it means to the county and what it means to the employees,” Gourley said after the Thursday night meeting.
Commissioner Charlie Baum of Murfreesboro said through an email to The Daily News Journal after the vote he supported keeping the existing pension plan because he’s worried about future workers being able to afford making contributions.
“I realize there was no discussion tonight from the commissioners about rescinding the change to the county’s pension plan, but this was an important vote, and I do have some comments and thoughts,” Baum said.
“First, county employees seem to have been against the pension plan change,” Baum said. “Many wanted to keep the county’s defined benefits pension rather than switching to the hybrid option. Second, the county will likely be asking its employees to pay higher health insurance premiums next year when the county passes its budget for the next fiscal year in June, and switching from the county’s pension plan to the hybrid plan would impose an additional cost on our new hires.”So, new hires would bear the cost of higher health insurance premiums and the cost of a hybrid retirement plan requiring them to begin making contributions from their salaries,” Baum added.
Health insurance premiums for county employees probably will go up because the premiums themselves probably will be increasing and also because the portion of the premium paid by the employees vs. the county is scheduled to increase by 1 percentage point next year, Baum said.
The Tennessee Consolidated Retirement System the county uses for government workers is extremely well managed, and its administrators have made conservative decisions for it to be actuarially solvent, Baum noted.
“The result is that Rutherford County’s pension plan is currently fully funded where the present value of future revenues are 102 percent of the present value of future liabilities,” said Baum, who works as an economics professor at Middle Tennessee State University in Murfreesboro. “Of course, some pension plans in other states are in real trouble: For example, the funding ratio for the plan in Illinois is about 43 percent, and Kentucky’s pension plan is funded only slightly more (it is 51 percent funded). But this is not the case in Tennessee.”
Others joined Stevens in expressing disappointment about rescinding the previous decision to switch to a hybrid pension plan for future workers.
“I think it’s a bad decision,” Commissioner Brad Turner of Smyrna said through a voice mail to The Daily News Journal after the meeting. “I think we are costing taxpayers a significant amount of money related to this decision. But the decision’s been made.”
Commissioner Shawn Kaplan of Murfreesboro used Twitter to express his disappointment that the majority rescinded the hybrid pension plan.
“The employees of Rutherford County got burned tonight,” Kaplan tweeted. “Politics won over common sense. Back to a pension plan.”