Town needs $90k to close pension plan
MERRIMACK – Anybody have a spare 90 Gs kicking around?
The Board of Selectmen has asked acting Town Manager Bill Mulligan, working with department heads, to come up with $90,000 in savings from capital expenditures in order for the town to close out its town-managed pension plan by June 30.
Last year, the state ruled that town-managed retirement plans are unauthorized and must be dissolved. Since then, new employees hired in town were brought under the state plan, while the town negotiated with current employees to close the town’s plan and distribute funds.
Selectmen voted May 6 to terminate the town’s pension plan on or before June 30. Money will be distributed to employees, who can put the money in the state plan or into an IRA. About 90 employees were covered under the town’s pension plan.
Town officials discovered that they needed to kick in $541,000 to bring funds up to $2.4 million to dissolve the plan and distribute funds to town employees.
The pension plan is fully funded, emphasized Bob Levan, the town finance director.
“Our plan at the end of last year was fully funded based on actuarial standards,” Levan said.
Unfortunately, federal Internal Revenue Service standards for terminating the pension plan were different, leaving the town short.
“All this was done in good faith,” Levan said. “We did hire reputable consultants right from the start, and we did go through IRS hoops.”
Of the $541,000 needed, $451,000 has been accounted for, Levan noted.
The town in the past year has been able to save $348,000 because town hiring and some spending was frozen last fall as a response to tax bills that were up an average of 19 percent.
For example, some positions were left open, such as the Fire Department lieutenant, which was filled just in the past month.
“We went almost the entire year with that vacancy,” Levan said.
When a position opens up, it generally takes a couple of months to find a replacement, and then a month after the person starts working before the town begins paying health insurance. All the while, the town is saving money, Levan said.
Besides positions left open, other savings were realized because health insurance premiums rose about 16 percent instead of the anticipated 20 percent; fewer commercial haulers are bringing trash to the new transfer station than anticipated; and the Federal Emergency Management Agency provided money to the town to offset overtime and road salt costs spent on a winter storm.
There was a hodgepodge of savings from a number of areas that contributed to the $348,000, Levan said.
Also, the town saved about $103,000 by delaying the purchases of four new cruisers until the next fiscal year, Levan said.
That leaves the $90,000 in savings that Mulligan and department heads now are scratching to find in the current operating budget.
“I’m working on it as we speak,” Mulligan said. “I haven’t come up with the final numbers yet, but I’m close.”
He said he plans to report back to selectmen soon with a list of potential savings.
Patrick Meighan can be reached at 594-6518 or email@example.com.