When Bill Johnson came to work as the Director of Administration for the City of Fulton in 1996, the City was facing some challenges with its workforce.
“We were experiencing a lot of turnover and the City Council wanted me to investigate ways to fix the turnover. We identified the retirement plan as being one item we could look at.” Bill said.
Competition for quality workers was high because Fulton contends with the City of Columbia, City of Jefferson, and the City of Mexico for employees. All of those cities had higher LAGERS benefits than Fulton at the time. Unfortunately, the cost for the 2% LAGERS multiplier was higher than the City could afford then.
“But we still wanted to do something for the employees in terms of their retirement,” said Bill. “So we decided to form a 401 defined contribution plan in addition to the defined benefit plan. So in the year 2000 we got it going and some of the rules we had were that the City would match up to 3% after your first year and after five years of service we’d match 5% of salary.”
Employees were slow to sign up for the new plan. “It didn’t catch on very well at all. For the first several years we had less than 50% of the eligible employees participating,” said Bill. However, participation really picked up in the late 2000’s.
“The intent was that once the cost to the City for funding the match to the 401 exceeded the additional cost to go to the 2% on the LAGERS, we were going to kill
the match and then use the money we were using for the match to fund the difference,” he said. “The thought process was that it would not be a major hit all at once.”
In 2013, the City reached the point that they had been waiting for and looked, once again, into the cost for the 2% LAGERS program. What they found now was that it was ultimately going to be a savings to the City to carry out Bill’s plan, but, the employees were going to have to contribute 4% of their monthly salary to LAGERS to make it all work.
This plan met some opposition from a small group of employees. There were some that believed the 401 match was a better option for employees because they had the individual choice to contribute towards their retirement, where LAGERS contributions from employees are mandatory.
“The City Council saw it differently,” Bill said. “They wanted to make sure every City employee was taken care of with an adequate, well-funded, lifetime benefit.”
The City organized several employee meetings with a LAGERS representative to explain the plan, but did not take a formal poll of the workers. Bill said he tried this once at another city where he worked and the results were unfavorable. The question put to the employees was, “Would you rather have a 4% raise in salary or an increase in your LAGERS retirement benefits?” The employees overwhelmingly voted in favor of the raise even though the LAGERS upgrade was going to cost the City twice as much.
Bill asked one of the employees why he voted for the raise and his response was “I want the money for beer on Saturday night.”
“So, he got his money for beer,” said Bill.
At the City of Fulton, on the other hand, the majority of employees expressed support of the proposal and the changes went into effect in January 2014.
Not only has this plan saved the City money, it has helped to recruit and retain quality workers. “I really think it has helped with retainage,” said Bill. “The day the LAGERS statements come, everyone is looking at them, talking about them, and feeling pretty good about it.”
Bill says providing LAGERS is not just a benefit for the City’s employees, but for the taxpayers as well.
“We need to keep the employees that we have in order to maintain the level of service that the citizens have grown accustom to,” he said. “If we didn’t have these employees we would be training new ones and the quality of service would decrease.”