Fayette Commission defers decision on benefits plan pending study

Tue, 12/16/2008 - 4:46pm
By: John Munford

When Fire Chief Allen McCullough strode to the podium Thursday night, it was well after several residents again voiced their displeasure on the possibility of Fayette County adopting a defined benefit pension plan.

McCullough, representing the committee established by the County Commission to flesh out the pension plan details, said the group wanted more time to fully prepare a recommendation. The commission took no formal action on the matter, which will give the committee the time it needs, which McCullough estimated to be about six or eight weeks.

McCullough said the committee wants to investigate other options and also had concerns about the true administrative costs. There also were outstanding questions about the future legal and actuarial costs and how oversight would occur, he said.

Commission Chairman Jack Smith said the request caught him off guard, in large part because he hadn’t been following the committee’s action in an effort to not influence the outcome.

Commissioner Herb Frady replied that he still opposed the idea.

“I’m not knocking it but I’m not supporting it,” Frady said.

Outgoing Commissioner Peter Pfeifer said he wondered if the pension providers might be hesitating to back up their claims on the future costs of the plan. The question of how Fayette’s proposal is different from other failed pensions must still be answered, Pfeifer 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.

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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