City employees hired after Aug. 31 could be required to pay part of their salaries toward their retirement benefits.
Danville City Council will discuss the idea during its work session Thursday night.
The proposed change comes after the National Resource Network, in a report released in the summer of 2018, warned the city could face a $22.3 million five-year general fund gap if it doesn’t make any fiscal changes.
One of the recommendations was to require employees to contribute to the retirement system.
“The recommendation from the National Resource Network was the driving force behind this,” said Sara Weller, director of human resources for the city of Danville.
City employees currently do not put any of their salaries toward Danville’s employment retirement system.
Right now, the city pays 5.315% of a general employee’s salary into the system toward their retirement. For public safety employees, the city pays 16.089%.
The board for the city’s employment retirement system makes recommendations to City Council each year for how much the city should contribute to the system on behalf of employees, Weller said.
Under the proposed plan, employees would pay either 50% of the city’s adopted rate, or the rate the Virginia Retirement System is using for their employee retirement plan — whichever is less.
For example, a new general employee with a $45,000 annual salary would pay — under the city’s current contribution percentage — about $1,200 per year toward their retirement, Weller said. That is about 2.65% of that worker’s salary.
The city would contribute $2,400 per year — or 5.315% — for a current employee making the same salary.
For new public safety employees, their contribution rate would be 5% since that is the current Virginia Retirement System employee contribution rate, Weller said.
The city contributed about $4.5 million in retirement system contributions for its employees in 2018-19, finance director Michael Adkins said.
Theoretically, the change could save the city about $2.25 million if it were to apply to all current employees. However, since it would apply only to new workers, it’s hard to say how much it would save until all existing employees no longer are working for the city, City Manager Ken Larking said.
“It will accumulate savings that grow with every future year,” Larking said. “It depends on the turnover of our employee base.”
Harold Garrison, who served on a four-person subcommittee that made the recommendation early this year, said he had no problem with the proposed change.
“All my life, working in industry and in the public and private sectors, we paid into our retirement,” Garrison said. “I’m of the opinion that any employee anywhere should have some payment going into the retirement system.”
Danville City Council’s work session will be held in the Fourth Floor Conference Room in the Municipal Building after its regular meeting, which begins at 7 p.m.
Crane reports for the Register & Bee. He can be reached at (434) 791-7987.