Employees for the City of Buchanan will have a new option to save for retirement starting in the New Year.
Monday night, at the regular meeting of the Buchanan Common Council, the board of commissioners unanimously approved a resolution that will allow employees to contribute to an additional retirement plan.
The new plan, Municipal Employees’ Retirement System 457, will take effect on Jan. 1, 2017, and will allow all employees of the city to make bi-weekly payroll deductions to a Roth IRA account or into a post-tax account.
“It is an added opportunity for employees to stash a little bit of their money away for future benefit as they approach retirement,” said Bill Marx, city manager of Buchanan. “It might help them [employees], when longevity sets in — when they’re thinking about retiring — and it might help them with that decisions.”
Participation in the new plan will be optional; employees will be pre-enrolled by the city, but it will be up to individuals to contribute any funds to the account, according to Marx.
“There is no minimum amount you have to start with. Twenty to 50 bucks per paycheck isn’t usually missed,” Marx said. “I see some of them [employees] live paycheck to paycheck and it’s unfortunate, so hopefully this’ll help them out.”
As the council approved it, the plan will be totally funded by individual employees. The city will not contribute any funds to the accounts.
The MERS 457 plan will be offered in addition to the current pension plan that the city provides to employees, which the city contributes funds to alongside employees.
Employees under 49 will be able to annually contribute $5,500 pre-tax under current law. Those 50 and older will be able to contribute a catch-up amount up to a total of $6,500. In the case of 457 plans, they will be able to contribute up to $18,000.
“You have all that money that you contributed, plus the tax dollars you that would have been missing, working for you to gain interest and growth,” Marx said. “It’s a win-win situation.”