Grand Forks opposes plans to reduce public retiree benefits, cost city more
The city of Grand Forks will oppose three bills related to public retirement and pension plans that proponents say will help get North Dakota back on track to fully funding employee benefits, arguing the proposals will reduce benefits for new hir...
The city of Grand Forks will oppose three bills related to public retirement and pension plans that proponents say will help get North Dakota back on track to fully funding employee benefits, arguing the proposals will reduce benefits for new hires and cost the city more.
The proposed bills are part of an effort from the Public Employee Retirement System, or NDPERS, to fully fund the "Main Plan" that pays for state employee benefits. According to reporting standards from the Governmental Accounting Standards Board, the Main Plan is behind by about $1.7 million dollars, meaning the system itself is on track to become financially insolvent by 2106.
"At that point, we become like social security, where we become a pay as you go system, and we'd have to get a $100 million from the Legislature and political subdivisions to pay those benefits," NDPERS Executive Director Scott Miller said. "And nobody wants to see that."
Being that far behind can also affect how a political subdivision is rated and how much money it can borrow from the federal government, Miller said.
Grand Forks Compensation and Benefits Administrator Tangee Bouvette said Monday the city supports the organization's efforts to maintain viability, but the city can't support a proposal that might lead to reducing benefits for new hires.
"The NDPERS plan is one of the main benefits that the city offers, and it's what kind of sets us apart from a lot of private employers," she said. "The (NDPERS) defined benefits system is different because it's not just a pot of money that will run out. It's a lifetime benefit after retirement that will continue on for the rest of that employee's lifetime."
Employees must currently pay for 7 percent of their benefits, and employers are responsible for matching that with 7.12 percent.
The first bill proposes the state increase employer and employee contributions by 1 percent by January 2020. Bouvette estimated the city would spend approximately $223,000 more on about 400 of its employees with this increase.
"That's a significant amount of money," she said. "That's probably a third of what we usually fund annually for the salary plan."
A second bill proposes decreasing a retirement multiplier from 2 percent to 1.75 percent, ultimately decreasing the amount of money city retirees that were hired by 2020 would receive every month by 12.5 percent, Miller said.
A third proposed bill asks the state to discontinue the Retiree Health Insurance Credit benefit for employees hired after Dec. 31, 2019, Miller said.
"Right now, for people who are members of the retirement system, the employer contributes an extra 1.14 percent on their behalf to a RHIC fund," Miller said. "After they retire, they get $5 for every year of service that they have, every month, to help them pay for some kind of health insurance."
If the Legislature approves the last proposal, employers would still be responsible for paying 1.14 percent, but that money would go into the Main Plan instead of a RHIC fund.
Of all the proposals, Miller said his group prefers the first one because it doesn't mean reducing benefits.