MFP Item 4
April 29, 2010
Worksession
MEMORANDUM
TO:
FROM:
SUBJECT:
Management and Fiscal Policy Committee
Robert
H.
Drummer, Senior Legislative Attorney
IG
Worksession: Expedited Bill 18-10, Personnel - Retirement - Furlough ­
Imputed Compensation
Expedited Bill 18-10, Personnel - Retirement - Furlough - Imputed Compensation,
sponsored by the Council President at the request of the County Executive, was introduced on
April 13,2010. A public hearing was held on April 27.
Background
The Executive's Recommended FYII Operating Budget includes 10 furlough days for all
non-public safety County employees. Under the current retirement laws, an employee who takes
a furlough would also suffer a corresponding loss of retirement benefits due to the reduction in
regular earnings. However, §30-2(b)(3) of the Personnel Regulation requires the County to
ensure that retirement benefits are not adversely affected when an employee takes a furlough.
Bill 18-10 would amend the definition of regular earnings in the retirement laws to include
imputed income not received due to a furlough.
This Bill would ensure that a furlough does not reduce the employer and the employee
contributions to the plan or any pension benefit. The Bill would also prevent a furlough from
resulting in a reduced disability benefit for a member of the Retirement Savings Plan or the
Guaranteed Retirement Income Plan.
Public Hearing
Wes Girling, Benefits Manager, OHR, testified in support of the Bill on behalf of the
Executive. See ©8. Mr. Girling testified that the Bill would implement a personnel regulation
that has existed for more than 15 years. Bob Stewart, Executive Director, UFCW Local 1994,
also testified in support of the Bill.
Issues
1.
What is the fiscal impact of the Bill?
The OMB Fiscal Impact Statement (PIS) concludes that the Bill would have no fiscal
impact because the Executive "assumed its effect in his March 15 recommended budget." See
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©7. Unfortunately, the FIS does not state what dollar amount was "assumed" in the budget. At
the request of Council staff, OMB subsequently estimated the cost of this Bill if the Executive's
furlough plan is approved to be $2.2 million in FYIl. See ©9.
The Executive's lO-day furlough plan would reduce an employee's salary by 3.8%.
Since employer and employee retirement contributions are based upon actual earnings,
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both the
County and the employee would contribute 3.8% less to the retirement plan. For example, an
employee in the retirement savings plan (RSP) contributes 4% of actual earnings and the County
contributes 8%. The Bill would require the County to contribute 8% of what the employee,
would have earned without a furlough, which would be more than 8% of actual earnings. The
employee would similarly contribute more than 4% of actual earnings.
In addition to the cost of the additional employer contribution required by the Bill, a
participant in the defined benefit retirement plan would receive an enhanced pension at
retirement ifFYll is one of the participant's highest 36 months of earnings. The County would
have to contribute an additional amount to the ERS Trust Fund to account for this if the Bill is
enacted. The County's actuary has not yet estimated this cost. However, since a furlough is a
temporary reduction in salary, the imputed compensation would not automatically carry over into
the calculation of regular earnings in future years because it is assumed that. the employee's
salary would automatically return to its FYlO level in FY12.
2. How would this Bill benefit employees who are furloughed?
This Bill would benefit employees differently depending upon their retirement plan and
their retirement date. RSP and GRIP employees would receive a marginal increase in the
contribution made by the County to their individual retirement account. They would receive 8%
of their full salary, which would be more than 8% of their actual earnings in FY 11. These
employees would also contribute more than 4% of actual earnings to their individual account.
The result would be more money deposited in their account and a slightly smaller paycheck.
ERS employees in the defined benefit plan would be affected differently. All ERS
employees contribute a set percent of regular earnings to the retirement plan. The Bill would
require these employees to contribute a greater percentage of actual earnings. However, only
ERS employees who retire in the next 3 years are likely to benefit from the Bill. If an
employee's highest 36 months includes FYll, then the employee would receive a higher pension
at retirement due to the imputed compensation.
If
an employee's highest 36 months does not
include
FYll,
even with the imputed compensation, then the employee would not benefit
from this Bill at all.
3. Should the Council enact the Bill?
The Bill would lessen the financial burden of a furlough day on all RSP and GRIP
employees and those ERS employees close to retirement. However, the cost does lower the
savings from each furlough day. This is a policy decision that the Committee should consider as
part of the decision on the extent of furloughs in FYIl.
The imputed general wage adjustment approved by the Council last year in Bill 18-09 is an exception to this
general rule.
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This packet contains:
Expedited Bill 18-10
Legislative Request Report
Executive Memo
Fiscal Impact Statement
Testimony ofWes Girling
Joe Beach email dated 4-27-10
Circle #
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Expedited Bill No. _1.:..::S'--...:..10"----:-_----:-_
Concerning: Personnel - Retirement ­
Furlough-Imputed Compensation
Revised: Apri1S,2010 Draft No. _1_
Introduced:
April 13, 2010
Expires:
October 13, 2011
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: ....!N=o"-'-'n=e_ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President at the Request of the County Executive
AN EXPEDITED ACT
to:
(1) amend the definition of regular earnings under the employees' retirement system
and the retirement savings plan to include certain imputed compensation not
received due to a furlough; and
(2) generally amend the law regarding the employees' retirement system and the
retirement savings plan.
By amending
Montgomery County Code
Chapter 33, Personnel and Human Resources
Sections 33-35, 33-113 and 33-128
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law
by
original
bill.
Deletedfrom existing law
by
original
bill.
Added
by
amendment.
Deletedfrom existing law or the
bill by
amendment.
Existing law unaffected
by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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Expedited Bill No. 18 -10
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Sec.
1.
Sections 33-35, 33-113 and 33-128 are amended as follows:
33-35. Definitions
In this Article, the following words and phrases have the following
meamngs:
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*
*
*
Regular earnings:
Except as otherwise provided, gross pay for actual hours
worked.1 including paid leave, but not including overtime. Regular earnings for a
Group A, E, or H member who is employed on July 1, 2009 and participates in the
integrated or optional plan must include amounts as if the member had received an
increase of 4.5% in the member's gross pay as of July 1, 2009, except for the
purpose of calculating a member's contribution under Section 33-39.
Regular
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earnings for a Group F member who is employed on July 1, 2009 and participates
in the integrated or optional plan must include amounts as if the member had
received an increase of 4.25% in the member's gross pay as of July 1, 2009, except
for the purpose of calculating a member's contribution under Section 33-39.
Regular earnings for a Group G member who is employed on July 1, 2009 and
participates in the integrated or optional plan must include amounts as if the
member had received an increase of 4% in the member's gross pay as of July 1,
2009, except for the purpose of calculating a member's contribution under Section
33-39. If
§:
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15
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member is required to take any furlough, as defined in personnel
regulations adopted under Section 33-7(b), regular earnings must include any
amount the member would have received if the member had not been required to
take any furlough. Regular earnings for an elected official is gross pay for services
rendered to the County. Regular earnings must not exceed the limit under Internal
Revenue Code Section 401(a)(17), as adjusted by the Internal Revenue Service.
Gross pay must be used to determine benefits even if the County implements a
pick-up plan under Section 414 of the Internal Revenue Code. Gross pay must be
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(jj-
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Expedited Bill No. 18 -10
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used to detennine benefits even if a member has agreed to a reduction in earnings
under:
(a)
the County's deferred compensation plan under Section 457 of the
Internal Revenue Code; or
(b)
any statutory fringe benefit program sponsored by the County and
pennitted by the Internal Revenue Code.
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32
33
34
*
33-113. Definitions.
*
*
35
36
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In this Division the following words and phrases have the following
meamngs:
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39
*
(p)
*
*
Regular earnings
means gross pay for actual hours worked, including
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paid leave, but not including [exclusive of] overtime, without
reduction for participant contributions that are picked up under
Section 33-116(a), or contributions to any County deferred
compensation plan or statutory fringe benefit program.
If!!
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participant is required to take any furlough, as defined in personnel
regulations under Section 33-7(b), regular earnings must include any
amount the participant would have received if the participant had not
been required to take any furlough.
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*
33-128. Definitions.
*
*
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In this Division, the following words and phrases have the following
meamngs:
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*
*
*
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Final earnings
means the annual average of the regular salary of an employee less
any shift pay differential for the IS-month period immediately before the disability
o
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Expedited Bill No. 18 -10
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or any period of 18 consecutive months, whichever is greater. If
~
participant is
required to take any furlough, as defined in personnel regulations adopted under
Section 33-7(b), final earnings must include any amount the participant would
have received if the participant had not been required to take any furlough.
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*
*
*
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Sec. 2.
Effective Date.
The Council declares that this Act is necessary for
the immediate protection of the public interest. This Act takes effect on July 1,
2010.
Approved:
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Nancy Floreen, President, County Council
Date
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Approved:
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Isiah Leggett, County Executive
Date
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This is a correct copy ofCouncil action.
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Linda M. Lauer, Clerk of the Council
Date
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LEGISLATIVE REQUEST REPORT
Personnel
DESCRIPTION:
Expedited Bill 18 -10
Retirement
-
Furlough
-
Imputed Compensation
The requested expedited legislation would amend the definition of regular
earnings in the Employee Retirement System and the Retirement Savings
Plan to include any amount the employee would have received if the
employee had not been required to take a furlough.
The Executive's Recommended FYII Operating Budget includes 10
furlough days for most County employees. Under the current retirement
laws, an employee who takes a furlough would also suffer a corresponding
loss of retirement benefits due to the reduction in regular earnings.
PROBLEM:
GOALS AND
OBJECTIVES:
Under §30-2(b)(3) of the Personnel Regulation, the County must ensure that
retirement benefits are not adversely affected when an employee takes a
furlough. This Bill would amend the definition of regular earnings in the
retirement laws to include imputed income not received due to a furlough.
This Bill would thereby prevent a furlough from resulting in lower
employer and employee contributions to the plan and a lower pension
benefit.
COORDINATION:
Office of Human Resources, County Attorney's Office
FISCAL IMPACT:
Office of Management and Budget
ECONOMIC
IMPACT:
EVALUATION:
Fiscal impact statement to
be
provided at a later date.
nla
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OFFICE OF THE COUNTY EXECCTIVE
ROCKVILLE, MARYLAND 20850
Isiah Leggett
County Executive
I
--0
MEMORANDUM
April
8,2010
TO:
Nancy Floreen, President
Montgomery County Council
Isiah Leggett, County Executive
Proposed Legislation
Compensation
FROM:
SUBJECT:
--P
IAI'-_­
4z;::>'
Furlough - Imputed
Personnel- Retirement
Section
30-2
(b)
(3)
of the Personnel Regulations provides that the County must
ensure that retirement benefits are not adversely affected when an employee takes a furlough
day. To ensure no loss of retirement benefit when County employees are furloughed in FY
2011,
I am proposing the attached legislation that will amend the definition of regular earnings in the
Employees Retirement System and the Retirement Savings Plan to include any amount the
member would have received if the member had not been required to take a furlough.
With this bill, there will be no reduction in the employee and employer
contribution for retirement as a result of the furlough. Please let me know if you have any
questions or concerns regarding this proposed amendment.
cc: Joseph Adler, Director, Office of Human Resources
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056247
OFFICE OF MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
Joseph
F.
Beach
Director
MEMORANDUM
Apri123, 20 I 0
TO:
FROM:
SUBJECT:
Nancy Floreen,
p~ident,
County Council
Joseph F. Beach,
ec r
q:?
Expedited Bill 18 -' 0, :ersonnel- Retirement - Furlough
Imputed Compensation
~
The purpose ofthis memorandum is to transmit a fiscal impact statement to the Council
on the subject legislation.
LEGISLATION SUMMARY
Expedited Bill 18 -10 ensures that retirement benefits are not adversely affected when an
employee takes a furlough. The County Executive's Recommended FYII Operating Budget includes a
furlough requirement of 10 days (80 hours) for most County employees.
It
does this by amending the'
definition of regular earnings under the Employees' Retirement System (ERS) and the Retirement
Savings Plan (RSP) to include certain imputed compensation not received during a furlough.
FISCAL SUMMARY
This Bill does not have a fiscal impact on the County because the County Executive
assumed its effect in his March 15 recommended budget. It ensures that the same retirement
contributions to the RSP and to all pension plans in the ERS, including the Guaranteed Retirement
Income Plan (GRIP), will be made by the County and by affected employees as would have been made
absent the furlough requirement. It provides in legislation what is required under §30-2(b)(3) of the
Personnel Regulations. The Bill also prevents a reduced disability benefit for members ofthe RSP and the
GRIP due to the furlough requirement.
The following contributed to and concurred with this analysis: G. Wesley Girting, Office
of Human Resources, Alex Espinosa and Lori O'Brien, Office of Management and Budget.
JFB:lob
Attachment
c: Joseph Adler, Director, Office of Human Resources
Kathleen Boucher, Assistant Chief Administrative Officer
Dee Gonzalez, Offices ofthe County Executive
G. Wesley Girling, Office of Human Resources
Alex Espinosa, Office ofManagement and Budget
Lori O'Brien, Office of Management and Budget
Office of the Director
101 Monroe Street, 14th Floor' Rockville, Maryland 20850 • 240-777-2800
www.montgomerycountymd.gov
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\
OFFICE OF HUMAN RESOURCES
Isiah Leggett
County Executive
Joseph Adler
Director
:MEMORANDUM
April 27, 2010
TO:
Nancy Floreen, President
Montgomery County Council
Wes Girling, Benefits M g
Office of Human Resources
Retirement­
FROM:
SUBJECT: Testimony for Public Hearing on Expedited Bill 18-10, Personnel
Furlough - Imputed Income
Good afternoon. For the record, I am Wes Girling, Benefits Manager with the Office of
Human Resources. I am here today on behalf of County Executive Isiah Leggett to testify in
support of Expedited Bill 18-10.
Section 30-2 (b) (3) of the Montgomery County Personnel Regulations provides that an
employee's retirement benefits will not be adversely affected when the employee is furloughed.
This Personnel Regulation conflicts with provisions of the County Code governing the County's
retirement system because the definition of "regular earnings"
in
the Code does not include pay
that is not received because of a furlough. Without Expedited Bill 18-10, both the employer and
employee contributions toward retirement would be based on a lower salary and would result in
a lower retirement benefit.
Expedited BilllS-10 amends the defmition of "regular earnings"
in
both the Employees'
Retirement System (ERS), and the Retirement Savings Plan (RSP) to include imputed income
not received due to a furlough. By including the lost salary as imputed income for retirement
pm:poses, there would be no reduction to a furloughed employee's retirement benefit. The bill
also makes it clear that disability benefits for RSP and Guaranteed Retirement Income Plan
(GRIP) participants will not be adversely impacted by the furlough.
We urge the Council to approve Expedited Bill 18-10 and we look forward to working
with the Council as it considers this legislation.
cc:
Kathleen Boucher
Joseph Adler
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Page 1 of 1
Drummer, Bob
From:
Sent:
Beach,Joseph
Tuesday, April 27, 20106:50 PM
Drummer, Bob; Espinosa, Alex; O'Brien, Lori; Girling, Wes; Boucher, Kathleen
To:
Subject:
FW: E-Bill 18-10, Furlough - Imputed Compensation
Bob,
The amount included in the budget to continue making retirement contributions on behalf of employees who will
be furloughed in FY11 is $2.2 million. We do not believe there is a continuing cost related to this
recommendation, but we will verify with the actuary.
Joseph F. Beach, Director
Montgomery County Government
Office of Management and Budget
101 Monroe Street, 14th Floor
Rockville, Maryland 20850
240-777-2777
240-777-2756 (fax)
4/28/2010