Memphis cleared to make pension switch

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The city of Memphis will move forward with an unpopular change to an employee retirement plan on July 1 after a judge decided Monday to allow the switch.

Shelby County Circuit Court Judge Rhynette Hurd denied a motion by the plaintiffs — including police and firefighters unions — that would have temporarily blocked the city from moving employees with fewer than 7.5 years of experience from a defined benefit plan to a riskier plan whose final value will depend partly on an employee’s investments and market conditions.

The case will probably go to trial next year, said plaintiffs’ attorney Timothy Taylor, who also represents several city employee bargaining units. Unions and employees sued the city in November to challenge the change, claiming it violated the understanding employees had when they signed on and unfairly targeted newer employees.

The city expects to save about $7 million a year from the change, in addition to reducing its pension fund liability by $20 million, said the city’s attorney Allan Wade, who is also the City Council’s attorney. Having less liability will likely increase the city’s bond and credit ratings.

Hurd said an injunction could only be granted if the cost would be immediate and irreparable, which didn’t apply to plaintiffs years away from retirement who could potentially be reimbursed.

“The benefit to the plaintiffs of a temporary injunction is at best speculative, and the harm inflicted on the city of such an injunction is significant and could negatively impact all city employees and citizens,” she said.

But unions argue the change is another blow to employee morale as the city tries to recover from the loss in recent years of roughly 500 officers and 200 firefighters.

Memphis Police Association President Mike Williams said a defined benefit plan lets officers know exactly what they can expect and provides a “safety net,” which is important for municipal employees, who don’t get Social Security.

He said hybrid plans have been unpopular in other cities, which are now reverting to defined benefit plans, and he expects the same in Memphis.

.”We are pleased with the court’s decision with respect to the temporary injunction,” city Chief Legal Officer Bruce McMullen said in a statement released Monday afternoon. “However, this case is not over and we have no further comments at this time about the specifics of the litigation. … We understand change can be difficult, but the city is doing everything possible to make the transition smooth for our affected employees.”

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About Ryan Poe

Ryan Poe is a politics and policy reporter for the InforMemphis team at The Commercial Appeal. He covers city of Memphis government and politics.

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