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City staff proposes shifting retirement tier, warns of large buy-in and higher annual costs
Summary
Staff proposed moving the city from its current retirement tier to an L6-tier program (per staff), which would raise employer contribution rates and require a multi‑year amortized buy-in; staff gave figures for higher annual contributions and asked council to note the budget impact.
City staff (Speaker 2) presented a proposal to change the city’s retirement tier to an L6 program, saying the move would bring Neosho’s retirement benefits in line with nearby jurisdictions. "What we are proposing is moving to an L6 program that is 2% from the date of retirement through death," Speaker 2 said, describing the proposed benefit improvement.
Staff said the city currently benefits from an overfunding credit on the retirement system of about $1.1 million that reduces its effective employer rate today; converting to the L6 tier would require a buy-in payment staff estimated at roughly $1.4 million (staff described this as an administration/buy-in cost the retirement system would amortize). Staff told the council the city’s current retirement contribution this year is about $336,909 and that the change to the L6-level contribution structure would increase annual retirement costs to about $584,920 per year (staff presented these as rough, model-based estimates and said the buy-in would be amortized over 20 years).
Staff explained that the change would raise general‑employee rates to about 12.4% of payroll (with police at a comparable rate and fire rising to roughly 15.9%) and that the overfunding credit would be reduced after the buy-in. Council members pressed staff on where the overfunding credit sits (staff said it remains on the retirement system's books) and how the amortization and credits interact with year‑to‑year rates. There was discussion about first-year net effects and longer-term obligations; one council member calculated the combined near-term cost impact of health and retirement proposals could amount to several hundred thousand dollars annually.
Staff characterized the retirement change as a move toward regional norms and argued it would help retain and attract employees. Council did not take a formal recorded vote on the retirement change during the workshop; staff will include the retirement figures in the upcoming budget documents for council consideration.
