Atlanta Mayor Kasim Reed has unveiled a plan to reduce the annual and long-term costs of the city’s pension ­program.

The plan, presented to the city’s finance committee last week, would close the amortization period for the existing unfunded liability over 30 years and provide two options for the City Council to consider for employee pensions going forward.

One option would move employees into a defined contribution plan similar to a 401K in the private sector, while a second option would give employees the choice to enter into the federal Social Security system.

The employees and the city would make various contributions under both plans.

Over the first five years, the first option would reduce the annual required contribution by between $27 million and $31 million, while the second option would reduce the ARC by between $12 and $18 million, according to Reed.

The plan leaves the benefits already earned by current employees unaffected by future changes. However, it reduces the annual pension cost and pays off the city’s current unfunded liability, which is currently $1.5 billion.

Leaving the current plan in place would create a $4.5 billion debt over the next 30 years, Reed said, adding: “We don’t have any revenue capacity that addresses a $4.5 billion problem. This would absorb all of government.”

“Both options provide a pension promise to employees that the city can actually meet,” he added. “They give the city a long-term sustainable and fiscally responsible solution to support our employees through retirement and will allow us to recruit and retain great employees.”

Shortly after his inauguration in January 2010, Reed ordered a study of options to reduce the city’s growing pension obligations.

The study found that Atlanta contributes 39.1% of each employee’s salary toward pension benefits while peer cities contribute 20.8%.

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