Baltimore will offer new employees the choice of a defined contribution plan or a hybrid plan under reforms approved Monday by the City Council.
Newly hired workers will contribute 5% of their salaries to either plan. Current workers started contributing 1% last year to the $1.5 billion Baltimore City Employees' Retirement System defined benefit plan. Contributions will increase 1 percentage point over the next four years until they reach the 5% level. Before 2013, employees didn't make contributions. The city will contribute 4%.
The reforms were a compromise between union officials and Mayor Stephanie Rawlings-Blake, who last year proposed putting newly hired city employees into a defined contribution plan.
“Rather than waiting on a fiscal disaster, Baltimore is, again, being proactive in getting our finances in order for the long term by taking decisive action to significantly slow the growth of our unfunded pension liabilities,” Ms. Rawlings-Blake said in a statement.
In 2013, Ms. Rawlings-Blake unveiled a 10-year plan for dealing with a $686 million unfunded liability in the city employees pension fund, and a $765 million unfunded liability in the $2.26 billion Baltimore City Fire & Police Employees' Retirement System.
Ms. Rawlings-Blake will introduce legislation this summer to make similar changes for newly hired police and fire employees, a spokeswoman said.
The effective date of the changes was not available at press time.
Hazel Bradford writes for Pensions & Investments, a sister publication of Business Insurance.