The Tennessee Legislature has sent a bill to Gov. Bill Haslam's desk that will require some local governments in the state to increase the contributions to their pension funds.
Both the state House of Representatives and Senate unanimously passed the bill last week that resulted from a proposal by the office of David H. Lillard Jr., state treasurer, that affects local government pension funds that do not participate in the $40 billion Tennessee Consolidated Retirement System, Nashville.
The bill requires those local governments to contribute 100% of the “actuarially determined annual required contribution that incorporates both the normal cost of benefits and the amortization of the pension plan's unfunded accrued liability,” according to the text of the bill.
Blake Fontenay, spokesman for Mr. Lillard, said local governments that participate in TCRS are already required to make 100% of those actuarially determined annual required contributions.
“We were supportive of the bill. It's something our office suggested as a follow-up to an inquiry that some legislators had made,” Mr. Fontenay said. “We're obviously pleased.”
Among local governments that do not belong to TCRS is the $1.9 billion Memphis City Retirement System.
The administration of Memphis Mayor A.C. Wharton Jr. at an executive session of the Memphis City Council on March 18 recommended closing its defined benefit plan and starting a new 401(a) plan for new employees and unvested employees as of July 1, 2015.
The legislation is cited as a primary driver for the recommended closing of the DB plan. On July 1, 2013, the city contributed $19.53 million to its DB plan for fiscal year 2014, just 20.4% of the annual required contribution of $95.6 million.
As of July 1, 2013, the Memphis City Retirement System had $2.592 billion in liabilities, giving the pension fund a 72.6% funding ratio.