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City will change its pension system

The City of Lawton is changing its pension system for general employees, effective July 1.

With the start of the new fiscal year, existing employees will be under a defined benefit plan, while all "new" hires, or those hired on or after July 1, will be under the new defined contribution plan. 

The defined benefit plan is a traditional plan that guarantees recipients a specific monthly pension, based on their years of employment. The defined contribution plan (similar to a 401(k)) is based on how much an employee puts into retirement and over what period of time. City police and firefighters will remain under the existing state pension systems established for their groups.

The decision comes after more than a year of work by a committee appointed by the council to investigate the idea and city staff members who crafted ordinances for the new plan and changes to the existing one after the council gave its go-ahead. At the time, council members cited concerns about the existing pension system, which has an unfunded liability of $35 million under the latest actuarial study (which was last year). Council members argued that many municipalities and private businesses have discontinued defined benefit plans in favor of defined contribution plans, a cost-saving measure for those who implement it, a more portable plan for younger employees who change jobs frequently, and something that prompts employees to take a more active role in their pension plans because they set the amount of money they will set aside.

Council members finished the final step in the process last week when they approve an ordinance that bans new employees from participating in the existing plan effective July 1, then set up a new pension plan for new hires, and directed the city to participate in the Oklahoma Municipal Retirement Fund to handle the plan's administration, investment and management. The city's human resources director was appointed the city's agent to that state fund trust.

The action has its critics. Two council members questioned whether the change would affect the city's ability to attract and keep general employees, while two employee groups  the Pension Trust Board and the Employees Advisory Committee  have said they don't agree with the concept, although they would be willing to go along if the city guarantees the financial stability of the defined benefit plan for existing employees.

Assistant City Manager Bart Hadley, who also chairs the Pension Trust Board, said the council committee had two goals as members analyzed the idea of a new pension plan: developing a plan that did not negatively affect current city employees while crafting a plan for the future that begins to lower the "very large" unfunded liability of the existing plan.

Hadley said the pension board wanted an actuarial study as proof the new plan would not affect current and retired employees on the existing plan. He said the proposals have built-in protection for existing employees, to ensure councils "years down the road" can't implement changes without first bringing those proposals to the Pension Trust Board for analysis.

The Lawton Constitution

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