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7 city workers opt for early outs

7 city workers opt for early outs

March 22nd, 2013 in News

Jefferson City officials are getting more response than they counted on from the city's early retirement program.

The city government is using its Separation Incentive Plan (SIP) to reduce positions based on early retirement/resignation, instead of mandatory furloughs or layoffs due to the current budget crisis.

The city estimated it would need six employees to leave through the program to reach a savings of $150,000 in the current fiscal year.

By Thursday, it had seven employees, said Gail Strope, the city's human resources director.

She said the city will continue to consider employees for the program through April 15.

However, it's possible for applicants to be turned down if too many workers from a certain office or department are trying to leave through the program.

Those eligible for SIP include LAGERS retirement-eligible employees; full-time employees who are not LAGERS eligible, but who have more than 20 years of service to the city; and full-time employees with at least five years, but less than 20 years of full-time service.

The retirements/resignations must be effective by May 31.

For employees, the program offers these benefits:

• A lump sum payout of 15 percent of the employee's salary. For someone making $50,000 a year, that would be $7,500.

• A health insurance subsidy of $150 per month for six months, totaling $900.

• Different payout options for unused sick/vacation time.

For an employee with 250 hours of sick leave and 250 hours of vacation time, the payout would be $12,019, regardless of whether they're leaving through the SIP program or not.

Under the SIP program, for instance, that payout could be plugged into the employee's deferred compensation, which is invested, allowing them to receive higher monthly payouts.

Another option would be to have the money used for health insurance, or as a payout that's deferred until January 2014. In that case, the employee would get a 2 percent interest rate added to the amount.

Another benefit would be that an employee would be deferring payment to a future tax year, possibly one in which the employee would be earning less and be in a lower tax bracket.

Using the example of an employee earning $50,000, Strope explained how the SIP program allows the city to save money:

Including benefits that equal about 25 percent of the employee's salary ($12,500 in the $50,000-a-year case), the employee costs the city $62,500. If he or she leaves through the program, the city will have a gross savings of half ($31,250) during the current fiscal year, since the employee will be gone during the last half of the fiscal year.

Through SIP benefits, the city would pay the employee around an additional $11,250. So the net savings to the city would be about $20,000 during this fiscal year.

For each year the position remains vacant, Strope said the city would see a savings of that employee's total pay and benefits, or $62,500 for the $50,000-a-year employee.