Commission to vote Thursday for guaranteed lifetime pension for county workers

[Open government organization opposes defined benefit plan — See Letters.]

The Fayette County Commission is slated to consider adopting a defined benefits pension plan and select a vendor for the plan at its regular meeting Thursday night.

Although, nationwide, numerous pension plans in both private and government sectors have caused enormous financial obligations, county officials think this plan won’t fall into the same trap.

But detractors of the plan worry that the plan could still prove to be expensive and overly burdensome on taxpayers over time. They also argue that most private employers no longer offer such guaranteed pension plans.

The county contends the defined benefits package will actually save $550,000 since employees will be required to contribute 2.5 percent of their salary to the plan. This means that the county will ultimately pay a maximum of about 27 percent of an employee’s salary during retirement years, according to county officials.

County officials also contend that the defined benefits plan will help attract and retain quality employees thus reducing training costs, particularly for public safety positions as the training costs are “substantial.” The county had an employee turnover rate of nearly 20 percent a year through 2007, officials said.

Though they vary widely in structure, defined benefits plans typically guarantee a certain payment for the remainder of the employee’s life after they retire, usually including cost of living raises.

Under Fayette’s proposal, an employee will receive a monthly pension equal to 1.5 percent of their monthly salary multiplied by the number of years worked for the county, with a maximum total of 45 percent. There is also no cost of living provision in the pension plan.

The defined benefits plan would not give employees credit for time already served, officials said. Instead they would start accruing time served on the date the plan is officially adopted.

According to county officials, other details of the defined benefits plan include:

• Full vesting after five full years of employment with the county (if employees don’t stay five years they forfeit the rights to any retirement benefit); and retirement eligibility is reached at 65 years of age;

• The monthly retirement benefit is equal to 1.5 percent of their salary for each year of county service with a maximum of 30 years;

• The maximum retirement benefit is 45 percent of an employee’s pre-retirement salary;

• The county will only be contributing 3.8 percent of salaries to the defined benefits plan as opposed to 4 percent under the current retirement plan structure;

• If for some reason the county’s contribution to the defined benefits plan increases, the county will reduce by that amount the contributions to the defined contribution plan that will remain; and

• The funds are required to be audited annually.

In a letter to the editor in today’s edition, Fayette resident James Wingo of the Fayette Citizens for Open Government said the plan could put employees at greater risk should the plan be underfunded and possibly collapse.

“Unfortunately, the fact is a defined benefit plan puts the taxpayer on the hook for any shortfalls in participant pay-out funding,” Wingo wrote. “Taxpayers are the guarantors of the plan and it doesn’t stop with just today’s plan; once there’s a plan, it can be ‘improved.’”

Wingo noted that one of the biggest risks of the plan is that a future county commission might change the plan benefit.

The meeting begins at 7 p.m. at the county government complex at the corner of Stonewall Avenue and Glynn Street in the commission’s meeting room directly across from the fountain.