MED’s approximately 47 retirees learned recently they stood to lose many of their benefits as a result of the utility’s sale, but after they contacted city council members, officials are discussing “making them whole.”
The issue came to light during the July 30 council meeting when council member Ronnie Martin said he had been contacted by several retirees of Murfreesboro Electric Department. They told him their benefit plan was changing and he wanted answers from staff so he could respond to their questions, he said.
The sale of MED to Middle Tennessee Electric Membership Corp. had as one requirement that the city would take over and run the retirees’ pension plan for three years, then transfer it to a financial institution. MTE, the co-op’s new acronym, is to pay up to $3.5 million in costs to make the transfer, according to a sales document called a briefing book.
“The City must continue to hold the Plan, which was closed in 2011, because it was formed and administered as a municipal defined benefit pension plan since its inception,” the briefing book said.
The city sent retirees a letter dated July 8 that the city was taking over as group plan administrator for their health plan, which would remain unchanged for the rest of 2020. The Murfreesboro Post obtained a copy of the letter. However, the retirees would lose their dental, vision and life insurance benefits, the letter said, and those benefits would end July 31.
During the meeting, City Manager Craig Tindall drew a distinction between the pension plan and other benefits. He said that other than clarifying that the city would take over the pension plan, there were no changes “whatsoever.”
“We did change the plan only for clarification purposes to make it very clear in the plan that the city’s now administering the plan and not the electric department,” Tindall said. “But other than that, there were no changes made in the plan whatsoever, from a pension plan standpoint, there’s no change, no change in benefits, qualifications or anything along those lines. So, ah, right now, the pension plan’s all the same. Now, the employee health, the retiree health benefits, those will transition.”
City staff do not yet know what the MED retirees’ health insurance will look like because the city is studying its own health benefit plan for the new year, Tindall told the council. Health insurance is not part of the pension plan, he said.
Martin said it was important to him to make the retirees “whole.” Martin was the only council member who voted against the sale.
Tindall told Martin “we’ll try and do that,” and there are parameters the city must follow. “Change isn’t easy,” he said, especially for retirees. They will be integrated into the city’s health plan, which will potentially increase. There will be more discussions in September or October.
Tindall said that making retirees whole would not have to come before the council because it is a small amount. Council member Bill Shacklett said he would like for the council to be “in the loop before we make a change.”
Council member Kirt Wade said he would like to see a cost to the city for helping the retirees.
Vice Mayor Madelyn Scales Harris, who participated electronically, said retirees asked her if they were losing life insurance and other benefits and asked if that is the case. She said they were told they will not have life insurance, and for some, that is the only policy they have, and she wants to make them whole.
Council member Eddie Smotherman said, “I think these people have been promised something through MED for several years. I think this is one of the hiccups that may have slipped through,” but he wanted them made whole.
MTE sent this statement to the Post: “While the City maintained ownership of the MED retirees' benefits after the merger, MTE stands ready to assist in communication coordination with those individuals and cares very much about the stability of benefits for these retirees, whose service to the City was invaluable to building a strong and reliable power system for our community.”
When contacted later, Tindall told the Post that pension is separate from other benefits, which are often called OPEB, or other post-employment benefits. The retirees’ pension will not change, he said.
He said he did not believe OPEB were addressed in the sales agreement, but the retirees’ benefits will transition to the city’s OPEB system. The council wants to maintain as much as possible, he said, although there will be some changes.
“There’s always changes in insurance,” he said. “We’re doing the best we possibly can to make sure it’s cost neutral to the electric department retirees.”
Only one retiree had vision insurance; MED dropped that benefit years ago, Tindall said. Life insurance will continue with a different carrier; they will be underwritten on the city’s dental plan.
Studying options has been delayed because the city’s vendors are slowed down because of COVID-19, he said.
“We don’t have answers to questions we normally would have, but we’re working hard to get them and communicate them to retirees.”
The Post asked Tindall when retirees had been first notified of the changes. He said the sale closed on June 30, but retirees have been asking about the process for a long time and the city has spoken publicly about it. The July 8 letter may have been the first notification by letter, he said.
The Post contacted Martin, who said he did not know that any clear distinction was drawn over what specific benefits would continue when council discussed the sale, and since that is the case, the assumption is all benefits would continue.
“I don’t think a single council member would have voted for retirees to lose benefits,” he said.
A pension is different from other benefits, but that is a technicality and does not meet the spirit of the sales agreement, he said.
When asked how the city might pay for the other benefits, Martin said the MED sale proceeds are one possible source.