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File #: 12-1398    Version: 1 Name: 11/8/12 Employee Retirement Plan from Defined Benefit Plan to Defined Contribution Plan
Type: Resolution Status: Filed
File created: 11/8/2012 In control: City Council
On agenda: 11/8/2012 Final action: 11/8/2012
Enactment date: Enactment #:
Title: Resolution Regarding Transitioning the City’s Employee Retirement Plan from a Defined Benefit Plan to a Defined Contribution Plan
Sponsors: Jane Lumm
Title
Resolution Regarding Transitioning the City’s Employee Retirement Plan from a Defined Benefit Plan to a Defined Contribution Plan
Body
Whereas, The City Council gives direction to the City Administrator regarding compensation and benefits for non-union employees;

Whereas, The City Council wishes to convey its desire to reduce future pension costs for all union and non-union retirees while still contributing to employees’ retirement;

Whereas, It is a fundamental city responsibility to deliver services effectively and efficiently to residents at a reasonable, competitive cost, based on market-based employee compensation levels;

Whereas, Many public and private sector employers have concluded that defined benefit retirement plans are not sustainable in the long term and have transitioned to defined contribution (401-K type) plans for newly-hired employees;

Whereas, A Bureau of Labor Statistics study indicated that in 2008, the proportion of private sector workers nationally participating in a defined benefit plan had fallen to 20% and the State of Michigan as well as our two local public Universities - UM and EMU - offer defined contribution plans to new employees;

Whereas, With a defined contribution plan, the employee bears the risk of market and investment fluctuations and, as a result, the employer’s costs are less volatile, more predictable and more sustainable in the long term;

Whereas, The State of Michigan has recently passed legislation (PA 329) making it easier for local government units to transition to a defined contribution plan when an unfunded liability exists in their defined benefit plan, and other employers have demonstrated that this challenge can be overcome; and

Whereas, By adopting a defined contribution plan for new employees, the City likely would be better positioned to ensure it will continue to receive the full amount of its potential EVIP-related State revenue sharing funding;

RESOLVED, That the City Council directs the Cit...

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