County Council tackles pension reform Three bills would save county millions in benefit costs

October 19, 1993|By John Rivera | John Rivera,Staff Writer

The Anne Arundel County Council took up pension reform last night, considering three bills that would save the county millions of dollars in pension benefits for future employees.

Although the council took no final action, it did approve several amendments to a bill that would make it more expensive for county employees to transfer service credits from other governments.

Among the amendments is a proposal that would require five years of county employment before someone could benefit from the years worked in another government.

The council also heard testimony on a bill that would end the financially troubled pension fund for Elected and Appointed Officials, merging it with the general employees' plan, and another proposal that would end pensions for future council members.

A detailed legal opinion on the bill drafted by the administration of County Executive Robert R. Neall that would effectively end the pension fund for elected and appointed officials revealed that the fund was in even more trouble than was previously reported. An audit by the W. F. Corroon Co. in January 1992 showed that the plan was about half funded.

But according to an audit conducted in January 1993 by Corroon, the plan is only 39.5 percent funded. Only $9 million in assets were available in the plan, but a pension benefit obligation of $22.8 million had built up, leaving an unfunded obligation of nearly $14 million.

As a result, the county's contribution jumped from $1.6 million in 1992 to $5.2 million in 1993.

The fund drain had been blamed on changes approved by the council in 1989 that lowered the minimum retirement age to 50 with 16 years of service and raised the benefits by 20 percent for appointed officials.

But in the opinion of the auditors, the underfunding of the plan was caused mainly by officials who transferred pension benefits to Anne Arundel from the state.

Under Maryland law, an employee who transfers from the state to a local government must be given credit for his years of state service and must transfer to the local government what he paid into the state system. But the state does not have to transfer what it contributed to the employee's pension.

Mr. Neall has been criticized for adding to the problem by hiring 15 people on his staff from state government, who transferred a total of 137 years of service.

County labor unions have expressed concern that merging the appointed and elected officials' plan might harm the general employees' plan.

The employees' plan is funded at 101 percent, but if the other fund is merged into it, the funding would decrease to 93.5 percent, still considered an adequate level by auditors.

"Will the employees still have a qualified and solid retirement program?" asked Helen Simpson, president of the union representing the county's clerical and secretarial workers, in a letter read into the record. "Are the proposed bills a 'quick fix' to correct the problem today and without insight into future consequences?"

The transfer bill sponsored by Councilwoman Maureen Lamb would delay figuring employee buy-backs -- paying a fee to receive service credit from another government -- until the year of an employee's retirement, when the person's salary and benefits would likely be higher. By calculating buy-backs earlier, the county was in effect subsidizing employees' pensions.

With Ms. Lamb's bill, "there would be no subsidy for the employee on the county's behalf. If the employee wants the credited service, the employee would have to pay for the credited service, in toto," said Teresa Sutherland of the auditor's office.

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