Council passes pension bill revision

July 19, 1994|By John Rivera | John Rivera,Sun Staff Writer

The Anne Arundel County Council last night passed a bill that requires appointed and elected officials to reduce their monthly pension benefit if they wish surviving spouses to continue receiving benefits after they die.

Under current provisions of the financially troubled pension fund for appointed and elected officials, surviving spouses continue to receive the full monthly benefit until they die. The change will save the county $1.6 million.

The vote on the pension bill was unanimous.

At a public hearing before the vote, some council members said that by voting for the measure, they right the wrong in a 1989 bill that increased pension benefits. They blame this increase for putting the plan in financial trouble.

At the hearing, County Auditor Joseph H. Novotny complained that the bill takes away a guarantee of pension payments to his survivors should he die. He said that generally pension plans guarantee payments to survivors for 10 years.

Mr. Novotny, who is retiring in December, challenged the calculations made by W. F. Corroon, the county's actuary, that the pension plan is underfunded by $14 million. He said the figure was smaller.

"I'm here to tell you, and I can back it up, that it's $8 million today," he said.

He based his figure on a revised calculation by the actuary who now says the amount of underfunding is $11 million. From the actuary's new figure, Mr. Novotny also subtracts a $2 million payment the county has made to the plan in the current budget, an audit last week that revealed $800,000 worth of errors in calculating some pensions, and interest income of about $400,000.

Rather than blame the 1989 law that increased benefits for appointed officials and lowered the retirement age for all plan participants, Mr. Novotny said the real culprit is the ability of new Anne Arundel officials to transfer service into the plan or buy credit for the years of service they accumulated in previous government employment.

Furthermore, he said, the magnitude of the plan's underfunding is probably overstated because the actuary assumed a very low rate of interest on the investment of the plan's assets. From 1985 until 1994, the investment return on the plan was 10.8 percent, but the county's pension obligation was calculated using an 8 percent investment return.

Using a 9 percent rate of return on the plan's assets, half of the plan's $8 million unfunded liability disappears. Using the 10.8 percent figure, "the entire problem disappears and a surplus is created."

Deborah G. Turner, chairman of the Pension Oversight Commission, urged the council to pass the bill, saying it "may be the County Council's only opportunity to make retroactive corrections to the problems caused by giving appointed and elected officials the generous retirement benefits that have led to a huge underfunding in this plan."

Mr. Novotny's comments were preceded by a statement made by Councilwoman Diane Evans, R-Arnold, one of the bill's sponsors, that certain officials were working to see her bill was defeated.

"I'm quite fearful that this bill won't be passed tonight, that it will be torpedoed," she said.

David G. Boschert, D-Crownsville and the other sponsor of the bill, said he did not regret his 1989 vote in favor of changes in the pension fund because he relied on the advice of the Pension Oversight Commission, the personnel office, the law office and Mr. Novotny's auditor's office.

"The bottom line is we listened to the advice of professionals, and maybe that was our mistake in judgment," he said.

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