DATE: September 20, 2016
TO: Board of Mayor and Aldermen
FROM: Eric Stuckey, City Administrator
Russ Truell, Assistant City Administrator/CFO
Shirley Gower, Human Resources Director
SUBJECT:
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Consideration of Resolution 2016-64, a Resolution adopting Pension Plan Amendment #6, an Amendment to Adjust Rules of Withdrawal from the Plan. (09-27-16 WS)
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Purpose
The purpose of this memorandum is to provide information to the Franklin Board of Mayor and Aldermen (BOMA) concerning an amendment to the Employees’ Pension Plan regarding lump sum distributions.
Background
Employees that leave City employment with an actuarially calculated pension benefit certain level (currently $15,000 or less) are provided the balance as a lump sum payment. This is good for the Pension Plan and the employee. The employee is able to transfer their vested amount into another retirement vehicle. The Plan is able to avoid writing small pension checks during the lifetime of the retiree. From time to time, the threshold for lump sum payments has been adjusted to account for inflation. The Pension Committee recommended that the threshold amount be raised to $15,000, and BOMA approved such amendment in May, 2016.
For those employees who are not vested, their contributions are returned. The actuary has identified a case where the actuarially calculated pension benefit of a vested employee is less than the total of their pension contributions. Amendment #6 extends the “return of contributions” rule to those vested employees whose pension contributions are greater than the actuarially calculated pension benefit.
The Pension Committee unanimously recommended approval of the amendment to the Plan.
Financial Impact
There is a small financial impact resulting from this amendment, which addresses the fairness of treatment of similar employees.
Recommendation
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Staff recommends approval of the Resolution.