Can a Local Government Change its Retirement Plan?

Q. Can a local government change its retirement plan for certain employees? For example, if a city promises certain benefits at hire, two years later can they change the benefits because they cannot fund the plan?

A. Depending on the type of plan, the employer always has the option of amending the plan going forward. So, for example, if the plan initially stated that 10% would be deposited for each eligible employee they could amend that percentage up or down for any future years. In addition to this rule, if the employer is a governmental employer they have the option to amend the plan and have different contribution formulas for different employees. For example, they could change the percentages to reflect differences based on years of service. The longer you work, the higher the employer percentage can be.