City staff outline plan to preserve Port City Transit pension during VIA contract transition

City staff told the Mobile City Council at a Sept. 24 pre-meeting that they will bring an amendment next week to the VIA operating contract intended to preserve the Port City Transit defined‑benefit pension and route employer and employee contributions directly to the pension trust.

The plan, explained by Scott, a city staff member, calls for Port City Transit (operated under contract by VIA) to reduce its monthly invoice to the city by the combined amount of the employee pension contribution and VIA’s employer contribution. “We would then, pay the invoice for their operating cost for the month less that amount of money, and the city would then contribute those funds directly to the transit employees pension fund,” Scott said. He added: “The transit workers pension plan continues to function in its current form unchanged in any way, as a fully independent pension plan.”

Why it matters: Transit employees and retirees would remain in the existing pension trust rather than being moved into VIA’s typical defined‑contribution (401(k)) arrangements. Council members said the explanation responded to employee concerns after some received letters from VIA suggesting changes to pension terms.

What staff said

Scott summarized the pension’s history, saying the city’s transit system moved in 2002 from the state Retirement Systems of Alabama (RSA) into a self‑funded, defined‑benefit plan managed by a separate pension trust and pension board. Current employees make a 5% contribution from payroll; the city (through the contractor) matches that contribution under the current arrangement, Scott said.

Scott described the proposed implementation detail: VIA’s monthly invoice to the city is roughly $666,000. Under the proposal, the city would allow VIA to deduct employee and VIA pension contribution amounts from that invoice and the city would forward those deducted amounts directly into the independent transit pension trust. Scott said VIA’s counsel had told the city the company is agreeable to that approach.

Numbers cited in the meeting

- Employee payroll contribution: 5% (as currently deducted). (Scott) - VIA monthly invoice to the city: about $666,000. (Scott) - Last year’s pension contributions to the transit plan: $897,000 total, about $297,000 from employees and about $600,000 from the city, according to Scott’s summary of the plan’s funding. (Scott) - Pension audit figures referenced by a council member: roughly $1.6 million in distributions last year and about $21 million in assets. (Preston Wood) - Staff estimated the city’s eventual net cost marker at roughly 7% (with other language putting an estimate near 8% as a comparison to RSA rates). (Scott)

Council reaction and employee concern

Council members welcomed the explanation as reassurance to transit employees. Councilman Carroll said employees had received letters from VIA that prompted alarm: “The letter basically said, ‘you've gotta sign this letter if you want to have a job. And, oh, by the way, your pension is gonna be changed,’” Carroll said he was told by an employee. Carroll said he and staff had followed up with the employee.

No formal council vote was taken. Staff said they will prepare a formal amendment to the VIA contract and present it to the council next week for consideration. Scott said VIA’s attorney had indicated agreement with the approach and that he expected staff to place the proposed amendment on next week’s agenda.

Discussion vs. decision

Discussion: staff outlined the model that preserves the current pension trust, explained the historical context of the 2002 transition, and discussed estimated percentages for employer contribution.

Direction/assignment: staff will draft and present an amendment to the VIA contract to implement the described payment routing and pension contribution mechanism.

Formal action: none taken at the pre‑meeting; the proposed contract amendment had not been introduced or voted on during the pre‑meeting.

What’s next

Staff said a more formal document was forthcoming and that the amendment would be presented to the council next week. Council members asked for clarity on exact contribution percentages and the audit documents staff referenced; staff said those materials (including the 6/30/2024 pension audit) would be available as the item advances to the formal agenda.

Ending

The council’s pre‑meeting discussion left the pension in place for current employees and retirees pending the formal contract amendment; council members and staff said the change, if approved, is intended to be administrative and to avoid reducing promised retirement benefits.