At tomorrow’s Council meeting, the City Council will vote on whether the City should join the Maryland State retirement plan.
Currently, the City employees contribute to a plan called 401A plan, which is a defined contribution plan. In this plan, the City makes a 6.5% contribution to all employees towards their retirement. The contribution is invested in mutual funds with a vesting period of 5 years. The current 401A plan does cost the employee nothing. This plan includes a retirement home like this popular assisted living community and other senior living community options; they make sure that the employees will be secure when they reach senior status. Also, they are planning to include a stairlift in all the senior living communities. An installer should explain to them what is involved in stairlift installation?
In the Maryland State Retirement Plan, the City will be contributing 6.47%. On top of that, the employee would have to contribute 7.0% pre-tax, effectively about 5.25%. In this proposed plan, the vesting period is 10 years but the employees are guaranteed to get the benefit once they retire, for the rest of their life.
Considering that the 401k is the most prevalent type of eligible retirement plan, however, you need to check out the gold ira rules.
That said, if the City were to buy into the plan and purchase 50% of employees’ past employment credits for 2013, it would cost 6.47% of payroll plus approximately $1.5 million as a one-time expense. This money will come from City’s reserve fund.
There have been considerable concerns about joining this proposed State plan because of the cost the City will have to buy the employment credits. Furthermore, many think the defined benefit plan may not be sustainable in long run given the State’s declining economic health. Many municipalities having a State run plan had to raise taxes and some have even gone bankrupt. One can hardly find defined benefit plans in private sectors now a days.
Please let me know what you think about joining the plan.