Ann Arbor Revises Retirement System

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At its Sept. 19, 2011 meeting, the Ann Arbor city council gave final approval to an ordinance revision that increases the city’s pension vesting period for non-union employees hired after July 1, 2011 – from five years to 10 years. It also changes the final average compensation computation so that it’s based on the the last five years of employment, not the last three years.

The ordinance change had been given initial approval at the council’s Sept. 6 meeting and came after a public hearing on Sept. 19, held before the vote.

The preparation of the ordinance change came at the direction of the city council, which passed a resolution at its June 6, 2011 meeting asking the city administrator to bring forward ordinance revisions that for non-union employees would change health care benefits and aspects of the city’s pension plan.

Specifically, the June 6 resolution pointed to ordinance revisions that would base the final average contribution (FAC) for the pension system on the last five years of service, instead of the last three. Further, employees would be vested in the pension plan after 10 years instead of five. Finally, all new non-union hires would be provided with an access-only style health care plan, with the opportunity to buy into whatever plan active employees enjoy.

At its Aug. 4, 2011 meeting, the council gave final approval to an ordinance change that addressed the health care provision from the June 6 resolution. That ordinance change distinguishes between “subsidized retirees” and “non-subsidized retirees.” A non-subsidized retiree is someone who is hired or re-employed into a non-union position with the city on or after July 1, 2011. In their retirement, non-subsidized retirees will have access to health care they can pay for themselves, but it will not be subsidized by the city.

The ordinance change that was given final approval at the council’s Sept. 6 meeting addresses the retirement plan portion of the June 6 resolution. All ordinance changes require approval by the council at two separate meetings, in addition to a public hearing on the change before the final vote.

The city expects that when it reaches a point when all non-union employees have been hired under the revised pension plan, the city’s costs will be $230,000 less than they would be under the current plan.

This brief was filed from the city council’s chambers on the second floor of city hall, located at 301 E. Huron. A more detailed report will follow: [link]