MEMPHIS, Tenn. — Four people have filed a class action lawsuit against the city of Memphis over changes to retirement benefits.
Those behind the lawsuit include the widow of retired police officer and three retired police officers.
They want a temporary injunction to stop the changes.
On June 17, the Memphis City Council voted to amend the health benefits offered to current and retired city employees due to rising costs and money city leaders say is needed for the pension.
There are three types of plans offered to employees and there are different classifications such as active, retired 65+, retired under 65 and retired who also qualify for medicare.
The biggest hit is felt by those who retired before they were 65 years old, many of whom are safety workers due to injuries and stress on their bodies.
The 24% insurance fee increase is effective Oct. 1. The end of the 70% subsidy for certain retirees is Jan. 1, 2015.
Not affected are families of city employees who have died in the line of duty according to Mayor A C Wharton.
The council vote was 7-5 to approve the proposal from Mayor A C Wharton.
Council members Janis Fullilove, Wanda Halbert, Lee Harris, Joe Brown and Bill Boyd voted against the change, Harold Collins was out-of-town.
Here is how healthcare benefits for current city employees will change according to information from the City of Memphis:
There will be a 24% premium increase, though a 57% hike was originally proposed.
Those who smoke will pay more.
Spouses will not be covered if their employer offers insurance.
Currently, a single employee pays $175 for the Premier plan per month and a family would pay $355. The new rate will be $218 for a single person and $440 for a family.
How retirees are affected:
City of Memphis retirees have received a subsidy to reduce their cost.
That subsidy has been eliminated for those who retired before reaching the age of 65 and those who retired after turning 65 and are eligible for Medicare.
Currently, a single, post 65 retiree pays $365. The new rate will be $452.
A single employee who retired before reaching age 65 currently pays $184 for the premium plan, that will increase to $836. For a family, the current cost is $365 for the premier plan, but with the loss of their subsidy they will pay $1,656.
City leaders have said they will continue subsidies to those retirees who do not qualify for Medicare.
The Pension:
Memphis Mayor A C Wharton has proposed changing city employees from a pension to a 401 (a) plan. Wharton has said the current pension plan is unsustainable.
A consultant for the city estimated the pension is underfunded by $467 million.
A report commissioned by the Memphis Firefighters union put the number at $301 million and a report done by PricewaterhouseCoopers which put it at $682 million.
Pension proponents say the plan has worked well and would actually save the city money compared to funding a 401 style contribution plan.
The council will take up the pension plan debate October 7.