Franklin’s Board of Mayor Ken Moore and Aldermen voted this week to raise the cost-of-living component of the city pension plan by 4.5 percent.
The resolution passed six to two with Vice Mayor Brandy Blanton and Aldermen Matt Brown opposing. Both originally advocated with Alderman Patrick Baggett to raise benefits an additional two percent, yet their push failed. Baggett ultimately still supported the 4.5 percent measure.
The board had been advised by city staff to approve the adjustment partly due to national inflation and projections of further inflation this year. This comes a week after the Federal Reserve raised interest rates and forecasted more hikes to come specifically to combat incessant inflation.
Alderman Brown explained his vote as coming not from a position of opposition to helping stave the effects of inflation on the city’s 261 retirees enrolled in the City of Franklin Employees’ Pension Plan, but one that proposes further due diligence.
“We definitely needed to provide this increase,” Brown said. “We’ve had a formula we’ve always used. I trust the pension committee. I think you guys brainstormed that — a unanimous vote on that. I think in this case I just would’ve liked to have seen us stay with our formula through these unprecedented times and make an adjustment at a later date.”
The 4.5 percent adjustment is expected to yield an approximate monthly increase of $26,000 in paid pension benefits — about $312,000 a year. Beginning in January 2017, the city no longer added new employees to this single employer plan but instead enrolled them in a multiple employer plan from the Tennessee Consolidated Retirement System, which the city has done well to manage in relation to the state pension’s interest rate fluctuation with the aid of Brentwood-based Findley — a division of Valhalla, N.Y.-based USI and the official actuarial firm of the state.
“Currently, the United States is experiencing a level of inflation not seen since 1981 due to supply chain interruptions, spikes in oil and fuel prices, lingering economic and workforce effects of the Coronavirus pandemic, international instability resulting from Russia’s invasion of Ukraine and a host of other factors,” according to city staff. “The magnitude and duration of the current surge of inflation is uncertain at this time. […] A 4.50% increase acknowledges the significant increase in the cost of living in the last year.”
A staff report warned against the risk that increasing benefits at a rate too much higher than the planned actuarial valuations would cause unfunded net liability to increase, making solvency a must for the pension. The plan dates back to 1971.