What pension fund gave, it may take away -- with interest

January 26, 1994|By John Rivera | John Rivera,Staff Writer

Elected and appointed officials whose pension benefits were significantly sweetened by a 1989 law passed by the Anne Arundel County Council not only face having those benefits rescinded, but may have to pay them back -- with interest.

A bill introduced Monday night by Councilwoman Maureen Lamb would require officials who received the increased benefits to pay them back to the county along with 4 percent interest.

The council also passed a bill Monday night that converted the officials' pension plan to one that pays benefits based on employee contributions rather than years of service. This "defined contribution" plan eliminates a problem in which state employees transferring to the county got credit for their service but transferred no pension assets, which actuaries said caused a major drain on the fund.

Ms. Lamb's bill repealing the 1989 law would roll back retirement benefits by:

* Reducing the pension for appointed officials from 2.5 percent of final salary for each year of service to 2 percent.

* Raising the early retirement age for employees from 50 to 60.

* Reducing what was a five-year window to buy service credit from other jurisdictions to only 1 year.

* Lowering the minimum pension that can be collected from $4,800 to $1,200.

The way was cleared for Ms. Lamb's proposal when Maryland Attorney General J. Joseph Curran Jr. issued an opinion last month that such a retroactive repeal was legally permissible.

Mr. Curran's opinion contradicted advice given to the county by two private law firms. Lawyers from Piper & Marbury of Baltimore told County Executive Robert R. Neall last October, when he was drafting legislation to fix a pension fund that had left the county with a $14 million liability, that benefits to 94 current or former officials could not be reduced or altered.

The attorneys based their opinion on the U.S. Constitution's contract clause, which prohibits states from enacting legislation that repeals contractual obligations.

In November, Steptoe and Johnson, a Washington law firm, delivered the same conclusion to the Pension Oversight Commission.

But Mr. Curran said the county's charter and code grant the council the power to repeal the pension benefits. He noted that the courts have upheld the authority of governments to modify or reduce such benefits.

After Mr. Curran issued his opinion, Ms. Lamb asked that the county's law office draft a bill retroactively repealing the changes to the appointed and elected officials pension plan made by the 1989 legislation. She also asked that provisions be added that would require retirees to return the additional benefits they received as a result of that law.

The bill states that if officials have not returned the full amount of the additional benefits within six months after they are demanded by the county's personnel officer, 10 percent of each pension check should be deducted until the amount is paid.

"If she thinks that's what she ought to do, then she ought to do it," said state Del. Theodore J. Sophocleus, a former councilman who is a member of the pension fund. Although he said he would not fight the bill, he thinks it is inevitable that others will.

"I think it will probably end up in court," he said.

Louise Hayman, a spokeswoman for Mr. Neall, said he came to the same conclusion.

Robert Schaeffer, president of the Anne Arundel Taxpayers Association, said the whole issue could be settled next week if an Anne Arundel Circuit judge rules favorably in the association's lawsuit to have the 1989 pension law overturned. The association is arguing that the county did not provide the required two weeks' notice in published advertisements of the bill's public hearing.

"This could just solve everyone's problem without all this maneuvering and posturing," Mr. Schaeffer said.

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