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City controller floats idea to change retirement plans

April 23, 2014

City of Indianapolis Controller Jason Dudich is seeking City-County Council approval to create a retirement-savings plan for city employees.

If the plan is carried out, new hires wouldn’t be eligible for pensions through the Indiana Public Retirement System. Instead they would have a defined-contribution plan similar to the 401(k) savings plans offered by private-sector employers.

“It’s not going to be an immediate savings (to the city) in the first year,” Dudich said Tuesday about the plan. But, over time, he thinks the city could reduce the bill it receives each year from the state for its contribution to the Public Employees Retirement Fund, which totaled $56.7 million last year.

The new plan would not apply to police officers, firefighters, judges and prosecutors. Police and firefighters account for the bulk of the city’s pension liability, about $35 million last year.

The council’s administration and finance committee on Tuesday night postponed a vote on the proposal. Committee Chairwoman Angela Mansfield, a Democrat, said she hesitates to move forward because the pensions are a good benefit for city employees who are otherwise low-paid.

Union leaders are wary of the plan. American Federation of State, County and Municipal Employees Local 725 President Steven Quick said employees have already foregone raises and switched to a more costly health-insurance plan because of the city’s budget woes.

“Where does it stop?” he asked the council committee.

Defined-contribution plans put investment decisions in the hands of employees, and Quick said they could end up short of the money they need to retire if they don't do their research.

“You could end up needing public assistance,” he said.

Although Dudich isn’t looking to change benefits for police and firefighters, Indianapolis Professional Firefighters Local 416 President Mike Reeves said he has misgivings.

“Are they going to come after the police and fire [benefits] in five years when Jason’s not here?” he asked.

If he gets the green light from the council, Dudich said he’ll hire a consultant to help design a plan and write a request for proposals. Many details need to be worked out, including the vesting period and whether the city would match employee savings.

Indiana has already switched to a defined-contribution plan for state employees, but it's not available to local governments.

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