South Lyon scraps non-union pension plans for new hires
LeAnne Rogers
Changes in South Lyon's pension offering for new hire non-union employees has been approved by the city council — the first step in seeking such changes for all new municipal workers.
Instead of a defined benefit plan through the Municipal Employees Retirement System, the city would now offer a defined contribution pension plus a 457 deferred compensation plan under which the city would match optional contributions from employees.
"This is the first step in making changes to the MERS retirement. The union contracts require that this be in place for the non-union employees before we negotiate this with them," said City Manager Lynne Ladner.
This change would affect non-union administrative staff such as the city manager, police chief, public works superintendent and city clerk. It is applied only to new hires, so the impact on the pension liability would be long-term.
Under the plan approved by council, employees would have mandatory contributions of 5 percent of their salary toward their pension with the city contributing 4 percent. The 457 plan gives employees the option of contributing an additional 3 percent of their wages toward retirement with the city matching the additional contributions.
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The changes, along with negotiating similar changes with union employees, are part of efforts aimed at addressing the city's current $4.8 million unfunded liability for its pension system.
"Any savings (from pension changes) will go to MERS to help pay down our unfunded legacy costs," said Ladner.
If an employee were to be promoted or transferred into a non-union position, Ladner said they would remain in the defined benefit plan and not be required to switch to the defined contribution plan as if they were a new hire.
Some council members were worried about requiring employee contributions or if the funding levels were sufficient to fund employee retirements. The recommended retirement funding level is 15 percent of wages.
"I was worried that we'd not be able to match and that the 5 percent mandatory contribution from the employee would be a problem," said Mayor Dan Pelchat. "But with the additional match we could get the employee to retirement. When I think of the municipal workers, they work hard, give their time and commitment. They expect a retirement."
Changes with this small group of non-union employees will get the ball rolling with the union bargaining groups, he added.
The unions have contractually agreed to move to the defined contribution plus plan, but the contribution rates would be subject to bargaining.
"This is pretty much what we were hoping to transition to. We can start small. If there are any misgivings, we can spot it and no one will be hurt," said Councilman Glenn Kivell.
lrogers@hometownlife.com
Twitter: @LRogersObserver