OCEAN CITY – An ordinance to switch newly hired municipal employees to a defined contribution pension plan moved toward second reading this week as the City Council agreed to add a vesting schedule.
Last week, as the council voted a new retirement policy for new hires through first reading, Mayor Rick Meehan requested the council add a vesting schedule to the ordinance before second reading.
Human Resources Director Wayne Evans reviewed the proposed pension plan and presented the council with a vesting schedule on Tuesday.
The council has decided to offer a defined contribution retirement pension plan for newly-hired town employees. The level mandatory employee contribution is 5 percent of annual straight time pay with employer match and the employee may contribute up to an additional 2 percent of annual straight time pay, with employer match.
Evans presented vesting provisions based upon the length of the employee’s career with the town. Upon the first year, an employee will receive a vested amount of 20 percent of the town’s contribution. That amount will increase by 20 percent every year, reaching 100 percent after five years.
“I would hope by the time someone has been with the town for five years they would want to continue their career here,” Evans said.
Evans added that a graded vesting schedule, where the town contributes a percentage each year, is encouragement for an employee to stay as well.
Councilman Joe Hall said he would want to vest the town’s contribution quicker than in five years.
“My whole thing was to pay the employee for the year they work … something tells me they should be vesting right away,” Joe Hall said.
Council President Jim Hall said the five-year vesting schedule made sense.
“It is short enough that it would gain my interest and I would want to stay,” Jim Hall said.
Meehan added the vesting schedule is comparable with the private sector, saying, “We want to be competitive … and still be an attractive place for employees to come and work.”
Meehan also warned in the next 20 years there is a definite cost to implementing a soft freeze on the current plan and beginning the new defined contribution plan.
Joe Hall motioned to add the vesting schedule and move the ordinance to final reading. The motion passed 4-3, with Councilmen Doug Cymek and Lloyd Martin and Councilwoman Mary Knight opposed.