New Canaan pension passed by Town Council
The Town Council voted July 18 to adopt The Funded Retirement Plan, a defined benefit plan for eligible full-time town employees, after the Internal Revenue Service made changes to the proposed pension.
The town had previously amended the plan and restated it as effective July 1, 2010, primarily to submit it to the IRS "along with an application for a favorable determination letter regarding a qualified tax plan," Pension Coordinator Diane Wilson said.
A favorable determination letter, according to the IRS website, expresses the qualified status of a sponsor's retirement plan and the IRS opinion of that plan.
Wilson said the town submitted the documents to the IRS in January 2011 and received a response in March 2012 with questions and alterations it wanted incorporated in the plan.
"We were fortunate enough to receive our favorable determination on June 15, 2012," she said, adding the town had 90 days, or until Sept. 13, 2012, to adopt the plan with these changes.
First Selectman and Board of Finance Chairman Rob Mallozzi noted the urgency of moving the plan forward to the Town Council at the Board of Selectmen and BOF meetings July 10, since the Council doesn't meet in August.
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The BOF approved the plan at that meeting.
The town hired John Galiette, an attorney with Reid and Riege law firm in Hartford, to assist with the IRS changes.
"The questions were mostly technical in nature," Galiette told the BOF earlier this month. He said the IRS focused mainly on including limits under section 415 of the Internal Revenue Code, which limits a member's annual benefit in proportion to the cost-of-living index in a given year.
"They didn't make substantive changes, but they added changes concerning how to calculate the reduction in the maximum benefit," he said, referring to IRS regulations issued in 2007. "If you commence a benefit before normal retirement date, the actuarial assumptions that you would use, they are basically specifying the regulations."
The changes included compliance issues with economic and growth tax laws, Wilson added.
"For example, updating covered compensation tables to current tables," she told the BOS. "Compensation limits that a person cannot be paid a pension bigger than $160,000. They were all items like that, that may not have been captured even back in 2010."
At last week's Town Council meeting, Galiette told members the IRS did not find anything controversial in the plan and said it's relatively routine for the IRS to return with comments on something that is submitted.
Among the members of the plan as of Jan. are 446 active employees, Wilson said, and 220 monthly payments go out to retirees.
The plan incorporates town unions, such as police officers, firefighters and the Department of Public Works. It also includes Board of Education unions like secretaries, custodians and food service employees.
Council members passed an amendment at their meeting excluding from the plan BOE members who are instructional assistants or teachers' assistants; supervisory, institutional or transportation aides; and BOE employees who started on or after Jan. 1, 2011.
This amendment was proposed after the plan was closed to non-union employees and it was learned this group of teachers' assistants were going to be unionizing, Wilson said, noting the BOE currently has about 250 members active in The Funded Retirement Plan.
"If they were hired prior to (Jan. 1, 2011) and they had more than a year of service as a teaching assistant, then they (could) go into the plan. So they're already in the plan," Personnel Director Cheryl Jones said. "As of January 2011, if they're brought on -- and those TAs come on in September -- then they would be eligible for the (town's defined contribution plan), and not the town pension plan."
"What happens if that employee subsequently becomes covered by a collective bargaining agreement with the town?" Councilman Roger Williams asked.
"Then they would go into the pension plan," Jones said. "The bargaining unions are still eligible unless it has been bargained out."
Williams was particularly vocal about the third and final resolution the Council just barely passed that night regarding a proposal to change the vesting status of elected officials from five years to four.
The reasoning behind this, Wilson said, was to coincide the vesting status with the typical two-year term of office.
However, Williams pointed out there are only two elected officials "that fall into this, because everyone else came in after Jan. 1, 2011, so they're not eligible to participate or be a member of the plan," he said. "Or they're already fully vested because they proved five years of service."
Williams named former First Selectman Jeb Walker and former Selectman Sally Hines as the beneficiaries of this amendment, which Wilson confirmed.
"So it's really to say, what we're trying to do here -- what this proposal is -- is that we retroactively go back in time and modify the plan for those two employees so they would receive benefits that the plan, at the time they worked (to) the time they left, did not provide them," he said.
Williams calculated Walker receives monthly payments of $944, and Hines $53 once she turns 65.
They would receive a monthly payment of $347 and $21 respectively if not for the period between 1997 and June 30, 2009, when employees were subject to one-year vesting as a requirement for IRC section 420 transfers that put excess pension funds into medical benefits for retirees.
"I, for one, have a real problem with this," Williams said, adding "It's not the sum total of the money. It's, what's next? Who's the next employee we're going to go back and modify something for?"
With a vote that tied at first, Councilman Kenneth Campbell said he voted to oppose the amendment accidentally and reversed his vote.
The amendment for four-year vesting passed 6-4, with one abstention. All resolutions concerning The Funded Retirement Plan were approved.
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