City 401k spared|Council pondered modifying city employees’ plan

Published 9:47 pm Friday, May 22, 2009

Contributing Editor

Proposals to modify the 401k plan for city employees got plenty of discussion during the Washington City Council budget work session Monday, but none of them won approval.
During the discussion, at least 40 employees were in the audience, but they did not speak. Ultimately, the council left the 401k plan in its present form.
One of the proposals, made in part to help the city reduce expensaes in fiscal year 2009-2010, was offered by Mayor Pro Tempore Doug Mercer, who raised the issue of the 401k plan policy during last year’s budget deliberations.
Currently, the city contributes $50 to an employee’s 401k account every pay period (26 pay periods a year) if the employee contributes at least $5 a pay period.
Mercer suggested requiring an employee to contribute $10 per pay period to get a $25 contribution from the city each pay period.
The current policy was adopted last year by the council, with it taking effect this fiscal year. It’s goal was to encourage more employees to save money for their retirements.
“The move we made last year had exactly its desire effect,” said Councilman Archie Jennings.
Currently, 32 employees make the minimal $5 contribution to get the $50 contribution from the city.
Jennings also suggested an alternative: The city would match an employee’s contribution dollar for dollar up to a specified percentage of the employee’s salary. Councilman Gil Davis said using that method would put lower-paid employees at a disadvantage. The current method treats all employees equally, he said.
Councilmen Richard Brooks and Darwin Woolard expressed concerns about trying to balance the budget on the backs of city employees during a recession that’s affecting them, too. The proposed budget for the upcoming fiscal year includes no cost-of-living adjustment in their salaries and increased costs for their health insurance.
“Give them the match, and let’s move on,” said Woolard, wanting to keep the status quo.
“Nobody wants to have this conversation, but they’re happening all over the world,” Jennings said, referring to how the sagging economy is forcing some employers to consider reducing or eliminating benefits for employees.
Brooks said reductions involving employees should be a last resort. He also reproofed Jennings and Mercer for “using employees as a stepping stone” in their effort to reduce city expenses.
“If you can’t live, how can you retire?” Brooks asked.
Jennings said reducing benefits is a more acceptable option than eliminating some employees if the economy doesn’t improve soon.
“It isn’t going to get any easier from here,” he said, noting the city’s revenues are down.
“I would rather cut other places,” Woolard said.