With Cities Pulling Out of State Pension Plan, New Options Offered

The Tennessee Consolidated Retirement System bills itself as “one of the best-funded pension plans in the nation,” but some local governments have been pulling their new hires out of the plan, reports Hank Hayes.
The city of Kingsport did. So did Johnson City and Tri-Cities Regional Airport. The reason: These cash-strapped political entities have found their contributions into TCRS to be too costly.
“Fifty-four (governmental entities) were at or above 15 percent of payroll (with TCRS employer contributions). … Speaking as a former county commissioner, that tells me they are under a bit of funding pressure,” said Tennessee Treasurer David Lillard Jr., who oversees TCRS.
For instance, TCRA’s TCRS contribution expense is almost 18 percent of payroll. The airport decided to go with a different defined contribution plan that would have a maximum 9 percent of payroll cost.
Kingsport’s and Johnson City’s TCRS pullout, in particular, got Lillard’s attention.
“These are all issues of concern to us because these are significant-size local governments, and they are entities participating in the system for many, many years — some going back to 1948,” he noted.
So Lillard hit the road last fall and did listening sessions with more than 200 local government officials about their future with the state’s pension plan.
Proposals from those meetings resulted in legislation passed this year to create three less costly investment options.
TCRS says the bill, scheduled to go into effect on July 1, would not apply to current local government hires, state employees, K-12 teachers or higher education workers. No local governments are required to make any changes. The provisions are only effective if adopted by local governments, according to TCRS.

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