Pension experts are scheduled to give new report to City Council Tuesday

June 10--The Memphis City Council voted to hire pension experts to help it sort out competing claims about the health of the city's retirement fund back in January. On Tuesday, an expert with the firm it hired, The Segal Company, is scheduled to give the council members a full report on the group's latest research.

The presentation is the only item on the agenda for a special 5 p.m. meeting at City Hall. The talk could influence how the council handles the major issues in city finances, including how much to add to the pension account this year, whether to find some of that money by cutting health-insurance subsidies for retirees and what property-tax rate to set.

Different experts have offered different opinions about the shortfall in the city's pension fund. City actuaries with PricewaterhouseCoopers said that as of July 1, the fund owed $682 million more to retirees than it had on hand.

The Memphis Firefighters Association, a labor union, opposes changes to the pension system and hired its own expert, William B. "Flick" Fornia, who used different assumptions and put the gap at $301 million.

PricewaterhouseCoopers has worked for the city for years, but some council members came to see its experts as the representatives of the administration of Mayor A C Wharton. Some council members have openly said in recent months that they don't trust the Wharton administration, and the council sought a third-party opinion, eventually hiring Segal.

The three sets of experts participated in a public discussion of their methods March 4. Segal later estimated the size of the pension gap at $467 million. Since then, the experts with PricewaterhouseCoopers and Segal compared notes and concluded jointly that the gap stood at $551 million as of July 1.

Fornia, the firefighters' expert, was not part of the later discussion, a fact that rankled union president Thomas Malone. "Why was my guy not brought into the equation?" he asked recently. Council members may ask the same question Tuesday.

Atlanta-based Segal actuary Eric Atwater said his colleague Rocky Joyner can't make it to Tuesday's meeting. But Atwater will tell council members about the joint discussions between the experts and the assumptions they made.

Clarity counts on the numbers because a new state law requires the city to pay its Annual Required Contribution, or ARC, by 2020. The ARC, pronounced like "park," is the amount of money that financial experts estimate the government must contribute each year to cover long-term payouts. For instance, Segal and PWC estimate the current ARC at $78 million.

In recent years, Memphis has paid about $20 million, far less than experts recommended. Wharton has proposed gradually boosting the city's pension funding amount until it pays the full ARC five years from now. But council members including chairman Jim Strickland support the concept of a faster, two-year ramp-up. Atwater said he will talk about the implications of shorter rampups at Tuesday's meeting.

Atwater said he won't discuss the possibility of moving to an alternative retirement plan, such as the 401(k)-style plan that Wharton has proposed for new hires and those with less than 10 years experience. Atwater said the Segal actuaries didn't have enough time to prepare to talk about that on Tuesday. "And then, secondly, we want to have that discussion be totally focused on only that alone." Segal will likely talk about it at a future meeting, he said.

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