EES pension plan touches live wire with employees

By Thomas Wilson
STAR STAFF
twilson@starhq.com
A recommendation to reduce retirement benefits has employees of the Elizabethton Electric System and the union representing them worried. The EES board of directors at Tuesday's monthly meeting accepted a recommendation made by their auditing firm to alter employees' pension plans to conform with the Tennessee Consolidated Retirement System (TCRS).
The Johnson City-based Blackburn, Childers and Steagall accounting firm recommended raising the system's minimum retirement age from 57 to 60 and reducing the annual retirement pay percentage given EES employees for each year of unemployment from 2.15 percent to 1.5 percent.
"The board does have the right to adjust those figures," board member Ken Wandell said when speaking with the Star on Tuesday.
EES presently operates its retirement system through the Massachusetts Mutual Insurance Company. The recommendation did not call for an abolition of the Mass Mutual plan for TCRS.
Each year an EES employee works, the employee earns 2.15 percent toward the system's existing pension pay plan. For example, if an employee retires after 30 years, he or she would receive an annual pension equaling 65 percent of the salary made in the last year of full-time employment.
Wandell said the board requested information from Mass Mutual to get more in line with surrounding utilities. He stated that the system faces servicing a long-term debt of $4 million plus what he termed a "three million dollar unfunded liability".
However, the union representing electrical workers employed with EES says, "Before they make any changes to pension or insurance, they are supposed to give me notice and open doors for discussion," said Randy Jones, business manager of the International Brotherhood of Electrical Workers Local 934. Local 934 represents approximately 30 EES employees, primarily linemen. Jones said Tuesday any alteration of employee benefits should include negotiation with the union.
System employees packed the conference room to hear the board meeting and questioned the board as to whether employee input would even count after chairman Gary Nave adjourned the meeting. Jones said he planned to meet with union members and EES administration in the near future regarding the pension plan issue.
Wandell said the TCRS system capped the number of years an employee could amass under the pension plan. If the EES board of directors opted to implement the 1.5 percent, the plan would not cap the number of years an employee could add, he said.
The system collected $2.2 million in sales revenue and saw a cash flow in excess of $3 million during June 2003. EES director of finance, Andi Talbert, reported operating revenues for the month had tumbled by 14 percent for June 2002.
General Manager Phil Isaacs said pension plan insurance costs jumped 74 percent from $161,000 last year to over $280,000 for the upcoming fiscal year. "We can make amendments to our current pension plan to reduce that, and we will," Isaacs said after the meeting.
Wandell pointed out the system presently serviced a $4 million debt with 25-year bonds and added that despite the system's cash flow, those scenarios meant the system could not spend money at will. "That is part of the reason we have to change it," said Wandell.
Jones has also questioned the make-up of the board's membership and lack of citizens and worker representation on the board. Specifically, Jones wondered if the board was more interested in keeping money in local banks represented by sitting board members. Janie Smith McKinney works for Citizens Bank in Elizabethton while Shirley Hughes is president of Elizabethton Federal Bank.
The system keeps revenue accounts and investments with Citizens Bank and Carter County Bank in Elizabethton.
"The less they have to spend the more they get to keep in their bank," said Jones.
Board chairman Gary Nave and board members Hughes, McKinney, and Wandell voted yes to change the pension plan, while Pat "Red" Bowers abstained.
Jones said the system's status as a municipal entity complicated the union's ability to negotiate and protect members' interests. Municipalities are not covered under the National Labor Relations Act.
"Any problems you have, you have to go in front of the board of directors," said Jones. "It makes it real difficult to get anything accomplished." Jones has expressed concern the board may have a conflict of interest in making board decisions - particularly financial decisions - given the position of some board members.
"It concerns me; they don't have a working person on the board and haven't had for four years," Jones added.
TCRS operates retirement pension plans for four groups of public employees: state employees, higher education employees, teachers and employees of quasi-government entities. TCRS invests retirement funds into domestic stocks, domestic bonds, international stocks, international bonds and short-term securities. Active membership in TCRS totaled more than 198,000 persons, including 44,000 state employees, 18,000 higher education employees, and more than 70,000 political subdivision state employees.
Like mutual funds and 401(k) plans everywhere, a punch-drunk stock market has not left the state retirement plan unscathed. The TCRS pension plan portfolio fell during the last fiscal year posting a 1.92 percent decline in annualized returns. However, that mark was better than the benchmark public fund index for pension plans, which fell 5.15 percent last year. TCRS domestic equity funds dropped 16.76 percent exceeding the benchmark of the Dow Jones and Russell 2000. The Standard & Poor 500 benchmark dropped 17.99 percent in domestic equity fund.
More than 150 cities, 87 counties, and 40 utility districts are among the governmental and political entities participating in TCRS. TCRS counts the Johnson City Power Board and Bristol (Tenn.) Electric System as plan participants as well as the Carter County and city of Elizabethton governments.