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Monday, February 3, 2014

Bucking The 401k Trend: Little Rock Officials Return Traditional Defined Pensions Option for City Employees

Photo Credit - wallstrrisk.com
"As City of Detroit retirees await results from negotiations overseen by U.S. Federal Court Judge Steven Rhodes after Emergency Manager Kevyn Orr demanded workers switch from the retirement board managed defined pension plans last March, municipal leaders in Little Rock, AK voted in August to return back into a traditional retirement structure for its municipal employees."
Following years of an effort lead by AFSCME Local 994, 900 Little Rock, AK city workers can elect to switch from a riskier 401 (k) retirement plan to a traditional defined pension plan.

The City 
will pay out 2 percent of employees' final average pay for every year they worked. City workers with 25 years of service can retire with a pension paying out 50 percent of their final average pay. Flegal said the new system also includes a cost of living provision.
"No one is going to be worse off," Flegal told local station KATV Channel 7. "Everyone is going to be better off."
Little Rock Board of Directors voted unanimously in August switch into a defined benefit plan for municipal city workers. This is considered to be the first time a municipality has made the switch from the 401 (k) to a pension plan. The move is designed to bring workers greater retirement security.

Following the sales tax election in 2011, the city hired a consultant to design a pension plan. Instead of getting a lump sum when you retire, workers will now a monthly check if they choose. The changes took effect January 1, 2014.

AFSCME Local 994 Union President Nita Moser said she hopes this move will inspire other workers to join unions following decades of declines in nationwide membership.
“I want this historic win to inspire other city workers to step up and form their own union within AFSCME,” Nita Moser president of Local 994 in Little Rock, Arkansas said.
Previously, depending on the volatile stock market, some city retirees were forced to return to work because their 401K retirement account income was inadequate. Employees over 60 years old are allowed to opt out of the change if warranted and all employees are allowed to leave the money they've already earned in their current plan.

AFSCME Local 994 led the charge, after spending years applying pressure to the Board of Directors. The members attended Little Rock Board of Directors meetings, worked to gather signatures on pensions and engaged in talks with the board.
“This is a huge win for our members, ” Moser said. “Now we’ve got to come together to keep the contract strong. We’ll never halt fighting."

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