Neall seeks rollbacks on benefits Officials' pension plan is under-financed

September 05, 1993|By John Rivera | John Rivera,Staff Writer

County Executive Robert R. Neall's staff is drafting legislation to fix an under-financed pension plan for appointed and elected officials that also could roll back some of the lucrative benefits for officials who already have earned them.

Mr. Neall was planning to introduce the legislation at Tuesday night's County Council meeting, but has postponed it for at least two weeks.

The pension plan has come under fire in recent months after an actuarial audit revealed it had only half the assets needed to cover the liabilities it had accrued. The county's other pension plans, for county employees, police and firefighters, and detention center employees, all were funded at 100 percent or more.

Mr. Neall's options include merging the county's pension funds with the state's system, or linking the appointed and elected officials' fund to the general county pension fund, which is the likelier option.

The executive "has already said he's going to close the appointed and elected officials' plan. Closing the plan is the easy part," said Louise Hayman, a spokeswoman for Mr. Neall. "But there are some other things he's trying to work into the legislation, and that's the difficult part."

Mr. Neall is trying to determine if he can do anything about the increased pension benefits and lower retirement age -- from 60 to 50 with 16 years of service -- the County Council approved in 1989.

Discussions among Mr. Neall's advisers center on whether and how much vested pension benefits can be modified "before you're on the other side of the law," Ms. Hayman said.

"Whatever we do, we want to make sure it's legally sound," said Dennis Parkinson, Mr. Neall's chief administrative officer. "We don't want to deprive somebody of something they're legally entitled to and can seek redress for in court."

County officials have been working for weeks on the bill and have gone through nine drafts so far.

"And there will be a 10th draft," Mr. Parkinson said.

Mr. Parkinson said that officials are dividing fund members into four groups. The first is future appointed and elected officials, whose benefits already have undergone significant changes. The minimum age was raised back to 60 in 1991, and, in June, the benefit was dropped from 2 1/2 percent for each year of service to 2 percent.

The administration will propose further modifications to that plan, Mr. Parkinson said, but he would not be specific.

"There are still a lot of liberal provisions in there," he said.

Changing benefits for anyone vested in the pension plan will be difficult, but Mr. Parkinson said it may be easier to modify benefits for the second group -- 40 people who still work for the county and still are contributing to the fund.

More difficult to deal with are the 52 people who have retired or who are vested but are no longer employed by the county, he said.

"The issue is whether we can get to them," Mr. Parkinson said. "The lawyers say we can't do it."

Normally, pension benefits are protected under the "contract clause" of the U.S. Constitution, which prohibits the state from enacting laws that deprive citizens of their contract rights. An employee's pension benefits are considered part of the employment contract, and cannot normally be modified.

But there is a legal precedent for rolling back pension benefits. In a 1984 U.S. District Court case, the Maryland State Teachers Association sued the state when it modified its pension system. The federal court found that the change was both necessary and reasonable, and that the state faced potential financial ruin if the modification were not made.

In addition, the benefit modification must be narrowly defined and a less drastic method must be used if one can be found. Presumably, Anne Arundel County would face the same test should its proposed bill be challenged in court.

And, as Mr. Parkinson pointed out, three of the key players in the 1984 case now are working on Anne Arundel's pension problems: Mr. Neall, who was minority leader in the House of Delegates; Mr. Parkinson, who was a deputy state budget director, and Judson P. Garrett Jr., the county attorney who was a deputy attorney general.

"So, these are familiar areas for us," Mr. Parkinson said.

County officials are not the only ones seeking to reduce the pension plan's benefits. The Anne Arundel Taxpayers Association said it will file a lawsuit this week that would achieve the same end.

The AATA, which is seeking to overturn the 1989 law, alleges among other things that the county did not abide by state law on prior notification of public hearings when it deliberated on the law, because it did not advertise it for two weeks before the hearing.

AATA President Robert Schaeffer reacted skeptically when he heard of the Neall administration's intention to roll back pension benefits.

"They are going to attempt to repeal their own pension benefits?" he asked incredulously. "And I'm the king of Siam.

"We're hoping to solve all their legal problems for them," he said. "If we win the suit, we'll repeal all their benefits for them."

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