Fayette approves pension plan

Thu, 04/09/2009 - 7:22pm
By: The Citizen

Fayette County employees will now have a guaranteed retirement pension so long as they can make at least five years service with the county.

The defined benefit pension plan was approved tonight by the Fayette County Commission on a 3-1-1 vote to select GEBCorp as the plan administrator. Voting for the plan were commissioners Jack Smith, Robert Horgan and Lee Hearn. Voting no was Herb Frady and abstaining was Eric Maxwell, who said he supported the pension plan but didn’t approve of the vendor that was selected.

The approval came after several residents urged the commission to vote the plan down over concerns the plan will ultimately be more costly further down the road.

Under the plan, employees will not be credited with any prior years of service.

The plan calls for monthly payments equal to a percentage of that employee’s salary multiplied by their years of service and 1.5 percent.

The maximum monthly payment will be 45 percent of their salary.

Employees are required to pay 2.5 percent of their salary into the plan along with the county’s 3.8 percent, a move cited for saving the county roughly $500,000 a year.

The plan was designed so that if the county’s contribution exceeds 4 percent of all salary for a given year, the county will shrink the amount of funds it contributes to employees’ individual retirement plans to cover the difference.

Financial planner Pat Hinchey challenged that idea, saying that attorneys would take action for employees to insure the county pays the additional costs instead of employees.

“The bottom line is this is going to come back on me and come back on my kids,” Hinchey said.

Angela Hinton Fonda said in light of the “economic tsunami” the figures used in studying the pension plan’s impacts on the county.

“The payout is the problem, it's not the pay-in,” she said, adding that she preferred to raise employee salaries instead of adopting the pension program.

Commission Chairman Smith said the county has endeavored to put “as many safeguards in the plan” as possible, but he acknowledged there is inherent risk.
The benefit of saving $500,000 a year far outweighs the risks, though, he said.

Smith said a future county commission could vote to end the defined benefit pension plan if it so chose. But Frady said he was more concerned with future commissioners improving the benefit to employees to a point that would encumber the county.

Smith added that the county’s plan will be fully-funded unlike the other types of defined benefit plans for private companies and governments that have gone under.

Maxwell said he feels there enough safeguards in place to protect the county.

“This decision will not put the county at a risk now or in the future year and saves the county money,” Maxwell said.

Fayette’s defined benefit pension plan does not include any cost of living adjustments, officials said.

The funds will be managed by an arm of the Association County Commissioners of Georgia that handles a statewide pension program, called GEBCorp.

Public Safety Director Allen McCullough, who served on an employee committee that studied the issue, told the commission last week that Fayette’s plan is not as aggressive as other defined benefits plans offered by other local governments.

While the county is going to be funding 3.8 percent of employee salaries, other municipalities have averaged 12 percent with some as high as 16 percent, McCullough said.

McCullough told the commission tonight that current long-serving employees are not likely to benefit much if at all from the defined benefit pension program. But he thinks it is essential to improving employee retention, particularly in public safety.

“When the economy turns around we are going to have another revolving door syndrome particularly in public safety,” McCullough said. “... We are better when we have people that are consistently here.”

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Submitted by Bill the Cat on Tue, 04/14/2009 - 3:03pm.

First off as a County Employee I would like to say thank you to the citizens that supported the pension plan and to the commissioners. Thank you for caring about the people who care and are always here when you need us.
as far as the comment post with the ridiculous salary facts, please look up the true facts of our salaries. Under the public records act, you can find out what the starting pay is for any county job position. You can also find out what our top out pay is for a particular job position. Even with the top out salaries, they are hard to reach because of our raise system and we don't always get a cost of living raise. Please take the time to print the true figures. Don't be ignorant to the true facts, the information is available for free.
Bill the Cat

Gene61's picture
Submitted by Gene61 on Mon, 04/13/2009 - 11:46pm.

Really, they approved it? Who here is truly surprised, not me...

funny how they never really defined the term " Salary " .. Makes all the difference in the world..

Submitted by Claude Y Paquin on Fri, 04/10/2009 - 8:42am.

This report has one major flaw: it does not tell us how the word “salary” is defined in the pension formula.

Let us suppose the county hires a 22-year-old recruit as deputy sheriff and pays him $32,000 the first year.

Then our deputy earns raises and gets promotions which cause his pay to go up, on average, 6 percent per year.

By the time he is 32, he is making $57,307.

By the time he is 42, he is making $102,628.

By the time he is 52, he is making $183,792. By then he has been with the county 30 years and is entitled to a pension equal to 45 percent of his salary. His average annual salary for the previous 30 years has been $87,537.

If our deputy sheriff were to leave the employ of Fayette County right at age 52, would he be entitled (at age 65) to 45 percent of his latest salary, at age 51, of $173,389? Or would he be entitled to 45 percent of his 30-year average salary of $87,537?

What if he stays on the force? By the time he is 62 he’ll be making an annual salary of $329,143, and by the time he retires at age 65 his average annual salary over 43 years will have been $139,541. Will he get 45 percent of that $139,541, or 45 percent of the $369,825 he made at age 64?

If he made $369,825 at age 64, will he be satisfied with a $62,793 annual pension (45 percent of $139,541)? That’s less than 17 percent of what he made at age 64.

One would hope our county commissioners know the answers to these questions. Of course, they’ll be long gone when the chickens come home to roost and so will many of us. As a member of the public, I can only bemoan that we have not been given all the facts, and my fear is that the county commissioners did not have all the facts either and were blinded by the perception the new plan will save them $500,000 this year.

Getting into a defined benefit pension plan is easy enough. Extricating oneself from one is something else.

Claude Y. Paquin

Submitted by Spyglass on Tue, 04/14/2009 - 9:49am.

I can tell you your figures are WAY OFF from the reality of salaries.

G35 Dude's picture
Submitted by G35 Dude on Fri, 04/10/2009 - 7:02pm.

A deputy works for 30 years and averages over $87K with a max of $184K? I should have gone into law enforcement.

Submitted by mysteryman on Tue, 04/14/2009 - 6:29am.

By the time the officer in the example above retires in 30 years that 300K will be the equivilent of todays salary. As Washington is aleady printing money as fast as the presses will dole it out. We will all be walking around will Thousands of dollars in our pockets by then, and will still be broke by the end of the week. Headlines from the year 2034.. Gallon of milk hits $199.95... Loaf of bread $75.00... Well you get the picture....Have a nice day....BLESS

SPQR's picture
Submitted by SPQR on Fri, 04/10/2009 - 3:37pm.

As you probably know the pension payout should normally be based on the average pay for all years worked. Thirty years worked so add up every years pay, divide by 30 and multiply by .45. You should also have an offset( penalty) for age under 65. This may be an oversimplification but it illustrates the general idea. Hopefully our commissioners understood these details.

Submitted by Claude Y Paquin on Fri, 04/10/2009 - 4:57pm.

It is fairly common in defined benefit pension plans for the benefit to be described as a percentage of the average salary for the last five years of employement, or the highest five years of employment history. A benefit based on average lifetime salary lags so much behind the cost of living index that it breeds dissatisfaction among the pensioners.

My point, in any event, is that the Citizen report failed to state how the "salary" the pension is to be based on would be calculated. Thus the public remains uninformed about an important aspect of the plan. (I have no intention to go dig it up by myself.) I hope the affected employees know what it is.

SPQR's picture
Submitted by SPQR on Fri, 04/10/2009 - 5:23pm.

it may be fairly common in the government sector to us the last five years as the base but maybe not the private fortune 500 sector. As an example check out what BellSouth did to their retirees, and believe me that company was never a trend setter. What I'm trying to say here is that a lot of folks in the real world got to eat dissatisfaction for breakfast.

sniffles5's picture
Submitted by sniffles5 on Fri, 04/10/2009 - 3:42pm.

Here are the details the commissioners understand:

By giving their employees generous pensions, they've assured themselves roughly a 2,000+ vote cushion come election time from grateful employees.

In a county where a turnout of 7 to 8 thousand voters at election time is the norm, a 2,000 vote cushion essentially guarantees them (the commissioners) lifetime tenure so that they may more effectively do the bidding of their developer masters.

"I scratched your back, now you scratch mine....after all, it's only taxpayer money...."

G35 Dude's picture
Submitted by G35 Dude on Sat, 04/11/2009 - 8:01pm.


SPQR's picture
Submitted by SPQR on Fri, 04/10/2009 - 8:34am.

What are these people thinking? its horrible now but by the time this thing gets tweaked by future commissioners it's going to be a nightmare.

What part of fiduciary responsibility to the taxpayers do our commissioners not understand?

What's really amazing is the undocumented anecdotal malarkey they put on the table in support. For example:

One major reason for losing employees is the pension plan.

Baloney. If there is a high turnover for folks under 50 years old the pension plan is not the big problem. Might be mentioned in an exit interview but that age group is typically losing sleep over the next mortgage payment and raising the kids.

Other governments have even more aggressive plans.

What governments? it would be nice to know this so we know where not to go when the wheels totally fall of here in Fayette. Come on now. are we really trying to emulate some of the incredibly dysfunctional neighboring governments?

Fayette does need an updated pension plan but running up a tab and handing it of to future taxpayers is just wrong.

Submitted by BOLO on Fri, 04/10/2009 - 6:01pm.

Next, they'll let the old timers buy their previous years of service so they can stick the taxpayers with a deficit for a full 30 years worth of unearned interest and payments for the rest of the old geezers' lives.

Oh, and they'll give the county employees another 6 days off with pay (out of taxpayer pockets) for Christmas and the New Year holidays.
"We" sure are a generous county.

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