County puts pension plan on hold

Fri, 12/12/2008 - 2:26pm
By: John Munford

Committee says more info needed

A proposal to adopt a defined benefits plan for Fayette County employees was postponed Thursday night at the request of the committee charged with making a recommendation to the Fayette County Board of Commissioners.

Allen McCullough, chief of the county’s fire and emergency services department, said the committee wants to investigate other options and also had concerns about the true administrative costs. There was also outstanding questions about the future legal and actuarial costs and how oversight would occur, he said.

It could take six or eight weeks for that analysis to occur, McCullough said.

The commission agreed by consensus not to vote on the matter.

Commission Chairman Jack Smith said he was “somewhat surprised” by the recommendation but he had no problem continuing the study.

The pension plan has drawn some criticism from citizens, particularly those affiliated with the watchdog group called Fayette Citizens for Open Government (FAYCOG).

The chief complaint of several citizens who addressed the commission tonight was that the county failed to publicize documents dating months ago relating to the background of the decision.

Former County Commission Chairman Harold Bost asked the commission to put the decision on hold.

“The details have not been properly communicated to the citizens of the county,” Bost said, adding that he found problems with the lack of published public notices in advance of meetings convened by a committee studying the matter.

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.

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.

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 the employee doesn’t make it five years they forfeit the rights to any retirement benefit; and retirement eligibility is reached at 65 years old;

• 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.

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Submitted by NeedtoKnow on Thu, 12/11/2008 - 10:11pm.

employees will be required to contribute 2.5 percent of their salary to the plan

Currently, contributing to the county's retirement plan is optional. Under this proposed plan, it would be required. I think there should be an opt-out for any employees who would rather not participate. That would mean, of course, that they would not have a "defined benefit" when they retire, and would be responsible for paying their living costs all by themselves. But so be it.

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