January 10, 2008
City Council Votes to Add Rule of 80 to Employees Retirement Plan
In what was being called a win-win situation for both the city and its employees, the Memphis City Council voted 4-0 to start offering the Rule of 80 as part of city employee’s retirement package.
Public relations specialist Jeff Kempker spoke at the January 3rd council meeting following an update meeting with city employees. The representative of the Missouri Local Government Employees Retirement System (LAGERS) discussed the proposal to add the Rule of 80, which allows an employee to retire with full benefits once the sum of his or her age and years of service equals 80.
Currently city employees may only receive full benefits if retiring after age 60. They can retire at age 55, but lose ½ of one percent per month that he or she retires early, up to a maximum of 30 percent for the entire 60 months.
Under the Rule of 80, an employee that started working for the city at age 18, could retire at age of 49, with the requisite 31 years of service.
Currently the city’s retirement calls for a contribution of 6.2% of all payroll funds. Due to positive growth of the LAGERS investments as well as lower than estimated usage, the city currently is paying just 0.6% of payroll for LAGERS coverage.
That figure would grow to 5.2%, or a growth of 4.6%. That would represent a cost increase of approximately $20,000.
Council members were quick to point out that recent changes in insurance coverage as well as salary factors for replacing an employee of 20 years or more of experience, with a new hire, would easily offset the added costs.
“Not only do the dollars and cents work out, but it is an excellent way to say thank you to employees that have put in the years to benefit this community,” said Alderman James Parker.
The council voted 4-0 to implement the Rule of 80 for the city’s retirement plan effective with the start of the new fiscal year on September 1, 2008.
Currently the city is funded in the LAGERS system at 2%, the highest benefit rate allowed. Upon retirement, the former employee will receive a monthly payment. The amount is based on average of the employee’s salary in his or her final three years. The payment equals 2% of that average salary times the total years of service.
So for example, an employee whose average monthly salary over her final three years was $2,500, who retires after 30 years with the city, would receive a monthly retirement payment of $1,500 for the rest of her life.
The program is funded by a 4% contribution by the employees in addition to the fluctuating percentage payment made by the employer.