Agenda Item 24
May 26, 2011
Action
MEMORANDUM
May 24, 2011
TO:
FROM:
SUBJECT:
County Council
Robert H. Drummer, Senior Legislative Attorney
f"\
f'tj
Action:
Expedited Bill 11-11, Personnel- Retirement Plans - Contributions
Expedited Bill 11-11, Personnel Retirement Plans - Contributions, sponsored by the
Council President at the request of the County Executive, was introduced on April 5, 2011. A
public hearing was held on April 26 at 7:30 p.m. and a Government Operations and Fiscal Policy
Committee worksession was held on April 25.
Background
Bill 11-11, as introduced, would increase member contributions by 2% of salary in the
Optional and Integrated defined benefit plans of the Employees' Retirement System (ERS) and
decrease employer contributions by 2% of salary in the defined contribution Guaranteed
Retirement Income Plan (GRIP)l and the Elected Officials' Plan of the Employee's Retirement
System and the Retirement Savings Plan (RSP). This Bill is necessary to implement the
Executive's FY12 Recommended Budget.
2
The Executive estimated the FY12 savings from
increasing the ERS member contributions by 2% in the defined benefit plans to be $6,044,180.
The Executive estimated the FYI2 savings from reducing the employer's contribution to the
defined contribution RSP and GRIP by 2% to be $4,860,290. See ©9.
The Bill would take effect on July
I,
2011 for all County employees, except elected
officials. The Bill would take effect for elected officials on the first day of their next term of
office. Article III, §35 of the Maryland Constitution prohibits an increase or decrease in
compensation during a term of office for an elected official. The State's Attorney, the Sheriff,
the Executive, and the Councilmembers are all elected officials serving a four year term of office
Although the GRIP is a cash balance hybrid plan, we are considering it a defined contribution plan in this
discussion because the employer's contribution as a percentage of salary is fixed.
2
The arbitration awards in favor of the International Association of Fire Fighters (IAFF) and the Fraternal Order of
Police (FOP) include no changes to the current retirement plans for fire fighters and police officers. The arbitration
award in favor of Municipal and County Government Employees Organization (MCGEO) contains a similar one­
year 2% reduction of the employer contribution to the RSP and GRIP and a one-year reduction in the employer
contribution to the defined benet)t plan with the members not earning service credit for FYI2. The Executive did
not recommend these retirement provisions in his FYl2 Recommended Budget. The Council adopted resolutions
indicating intent to reject the retirement provisions in the 3 collective bargaining agreements on May 9.
I
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subject to Article III, §35 of the Maryland Constitution. The County Attorney confirmation of
this interpretation of the Maryland Constitution is at ©12.
Council Budget Worksession
On May 19, 2011, the Council reached preliminary agreement on a $4.4 billion total
County operating budget for Fiscal Year 2012. The Council's budget agreement includes
significant modifications to the Executive's proposed changes to County employee health and
retirement benefits designed to create structural changes while significantly reducing the adverse
impact on County employees. The Council alternative plan would phase-in the 2% increase in
employee contributions to the defined benefit plans by increasing the contribution only 1% in
FY12 and 2% in FY13 and beyond. The Council alternative plan would also approve the 2%
reduction in the employer's contribution to the defined contribution plans as a one-time
reduction in FY12 only, consistent with the collective bargaining agreement with MCGEO.
Finally, the Council's alternative plan would limit the cost-of-living increase in the defined
contribution plans to 2.5% for credited service performed after June 30, 2011. Final Council
action on the FY12 Operating Budget is tentatively scheduled for May 26. A chart showing the
estimated savings from changes to employee health and retirement benefits in the Council
alternative plan is at ©13-15. An amended Bill to implement the changes to the County
retirement plans required by the Council's alternative plan is at ©16-28.
Issues
1.
Should the retirement plan savings from employees in the defined contribution plans
(RSP
&
GRIP) be similar to savings from employees in the defined benefit plans?
Currently, the defined benefit and the defined contribution plans have approximately the
same number of enrollees.
3
However, the County Government will pay $124 million (from tax
supported and non-tax supported funds) for employee retirement benefits in FYll: $105 million
for the defined benefit plan and $19 million for the defined contribution plans. While defined
benefit plans are more generous to employees and cost the County significantly more than defined
contribution plans, the Bill, as introduced, would require employees in both plan types to forego
identical amounts (2% of salary). In other words, the Bill would save the County approximately
25% of its annual defined contribution plan cost and only 5% of its annual defined benefit plan
cost.
The reason for the dramatic difference in cost of the two plan types is the significant
difference in the benefit earned by an employee at retirement. The Office of Legislative Oversight
prepared the following chart showing an example of the different pension benefits for a firefighter
III retiring after 20 years, a master firefighter retiring after 30 years, and a child welfare case
worker retiring after 30 years. Although the Bill would increase the employee contribution for a
master firefighter in the defined benefit plan, the present value of the pension benefit would
remain $1,291,709.
The present value ofthe retirement account after 30 years for a child welfare
case worker in the defined contribution GRIP plan would drop
16.
7%from
$536,132
to
$446,776
due to a
2%
reduction in the employer contribution.
J
The percentage of defined contribution members is growing over time because the defined benefit plan was closed
for non-public safety employees hired after October I, 1994.
2
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Summary of Income from Retirement Benefits
Examples of Employees Retiring at Top of Salary Grade in July 2011
!
Master
Firefighter
I
I
Child Welfare Case Worker
Firefighter
III
20
44
$74,272
$37,318
$37,318
$0
$37,992
$25,656
$12,336
with an employer contribution of:
8% of salary
6% of salary
30
54
$88,027
$0
LYears of Service
Age at Retirement
i
Final Salary
30
54
$87,422
$58,382
$58,382
$0
$57,166
$40,138
$17,028
30
54
$88,027
$0
i
I
I
i
Annual Retirement Benefit (until age
62)
Pension
Social Security
Annual Retirement Benefit (age
62+)
Pension
Social Security
Retirement Account Balance
Present Value of Retirement Benefit
excluding Social Security
including Social Security
- '-
' "
$0
$17,076
$0
$17,076
$17,076
$536,132
$17,076
$446,776
$1,291,709
$1,666,325
$1,198,851
$1,470,243
$536,132
$911,804
$446,776
$822,448
Assumptions
All dollar amounts represent current year dollars.
-
Pension payments and retirement account withdrawals are subject to Federal and State
income tax. All dollar amounts shown are pre-tax dollars.
All employees worked full time, were hired into their positions at age 24, and retire on July
1,2011
with no unused sick leave.
All employees retired with a top of grade salary for the position (including longevity
awards).
-
The Social Security Administration's online "Social Security Quick Calculator" is the source
for annual Social Security benefits.
Social Security pension amounts assume that retirees do not take another paid job after
leaving County service and will be eligible for benefits beginning at age
62.
The Child Welfare Case Worker's retirement account balance assumes a starting salary of
$25,000;
an annual employer contribution of either
8%
or
6%
of salary; an annual employee
contribution of 4% of salary; and participation in the GRIP with an annual guaranteed return
of7.25%.
-
-
Present value calculations assume that pension and Social Security cost of living adjustments
equal the future rate of inflation.
Present value calculations assume an average life expectancy of 84 years (the current average
life expectancy assumption for ERS plan members).
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Council alternative plan: reduce the employer contribution to the GRIP and the RSP in
FY12 only. This change in the Bill recognizes the significant difference between the benefits of
the defined benefit plans and the GRIP and RSP. This is also consistent with the arbitration
award in favor of MCGEO and the collective bargaining agreement.
2.
Should an employee be permitted to make-up the lost
2%
employer contribution in
FY12?
The County Attorney has advised Council staff that the Internal Revenue Code would not
permit an employee to make a voluntary contribution to make-up for the temporary loss of the
employer contribution with pre-tax dollars. However, the County Attorney has advised that
employees could be permitted to make-up this loss of employer contribution with after-tax
dollars. This would permit an employee who has made the maximum contribution to the
deferred compensation plan to voluntarily increase the employee contribution to the GRIP or
RSP and thereby continue the current retirement savings rate. We have also been advised by the
Board of Investment Trustees (BIT) that the plans already accept after-tax dollars from
employees in certain participating agencies. Therefore, this option would not reduce the savings
projected from the Council alternative plan. Council staff recommendation: approve the
amendment to permit
an
employee to make up the 2% reduction in the employer contribution
with after-tax dollars in FY12.4 See lines 76-80 and 213-217 of the amended Bill at ©19 ..20, 25.
3.
Should the employee contribution for an employee in the defined benefit plan be phased
in?
The Bill would require that all employees in a defined benefit plan contribute
an
additional 2% of salary annually. As shown in the table below, the impact of the Bill varies
among different employee groups.
Table 2: Executive's Proposed Increases in Employee Defined Benefit Contributions
I
Current Employee
Employee Group
Contribution
(% of salary)
5
4%
4.75%
5.5%
CE Proposed
Employee
Contribution
(% of salary)
6%
6.75%
7.5%
% Increase
in Employee •
Contribution
+50%
+42%
+36%
I
!
I
Non-Public Safety (hired before 10/1/94)
Police and Deputy Sheriff/Corrections
Fire
&
Rescue
I
4
A continuation of this provision beyond FYl2 could be a subject of future collective bargaining with MCGEO.
Employees in the ERS who earn more than the Social Security Wage Base ($lO6,800 in 2012) contribute a higher
percentage toward their pensions for salary earned above the Social Security Wage Base.
5
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The percentage increase in the employee contribution required by the Bill, as introduced,
varies significantly by group.
Council alternative plan:
phase-in the 2% across the board
increase by increasing the employee contribution 1% in FY12 and 2% in FY13 and thereafter.
See lines 7-62 of the amended Bill at © 17-19.
4. Should the Bill be amended to limit the cost-or-living provisions or the defined benefit
plans?
The Council alternative plan would limit the cost-of-living adjustment in a defined
benefit pension to 2.5% for all credited service after June 30, 2011. For current employees, a
future cost-of-living adjustment to a pension benefit would be calculated based upon a ratio of
the number of years of credited service before July 1, 2011 and the number of years of credited
service after June 30, 2011. This amendment would therefore only affect the benefit for years
not yet worked. The County's actuary estimated this amendment would save the County $3.15
million in FY12 and $18.9 million between FY12 and FYI7.
Council alternative plan:
adopt
this provision. See lines 195-199 and lines 302-303 of the amended Bill at ©24, 28.
5. How should the cost-or-living adjustment ror a disability pension benefit be capped at
2.5%?
The savings estimated by the actuary for the Council alternative plan include capping the
cost-of-living adjustment of a disability pension at 2.5%. However, disability pensions are
usually based upon a plan minimum percent of final salary rather than credited service. For
example, a service-connected disability pension for a police officer would be 66-%% of final
salary without regard for the number of years of credited service. Since a disability pension does
not vest until an employee becomes disabled, the most reasonable method to add a cap to the
cost-of-living provision would be to place a 2.5% cap on the cost-of-living adjustment for a
disability pension based upon a disability occurring after June 30, 2011. Therefore, if an
employee receives a disability pension after July 1,2011 that is based upon a disability occurring
before June 30, 2011, the 2.5% cap would not apply.
Council staff recommendation:
the 2.5%
cap on a cost-of-living adjustment would only apply to a disability pension based upon a
disability occurring after June 30, 2011. See lines 195-199 and lines 302-303 of the amended
Bill at ©9, 13.
6. Should the Bill amend the mandatory employee contributions to the Fire DROP Plan?
The County created a Deferred Retirement Option Plan (DROP) for both police officers
and fire and rescue employees.
An
eligible employee who voluntarily enters the DROP is
eligible to retire but continue to work. Each employee's participation in the DROP must end
after three years. The pension payment the employee would have received if the employee had
not participated in the DROP is deposited into a separate account until the employee leaves
County service. The employee receives the value of the DROP account at the end of County
service.
There are some significant differences between the two DROP plans. A participant in the
Police DROP must direct the BIT to invest the account into one or more funds selected by the
BIT. The participant receives the value of this self-directed account at the end of County service.
No further County or employee contributions are made to the retirement system.
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The Fire DROP is slightly different. The participant's pension goes into a separate
account for the participant, but the funds are invested by the BIT. The County guarantees the
participant interest on the account at 8.25%. A Fire DROP participant continues to make the
employee's contribution, but it goes into the employee's separate account. When the employee
finally leaves County service, the employee receives the value of the account plus the 8.25%
interest. The Bill would increase the participant's contribution to the Fire DROP, but this
increase would be returned to the employee at the end of County service. Therefore, the County
would not save money from the increase in the participant's contribution to his or her DROP
account. An amendment that would keep the employee contribution to the Fire DROP at the
current level is at ©29-30.
Council staff recommendation:
do not amend the Bill to account
for its effect on the Fire DROP.
This packet contains:
Expedited Bill 11-11
Legislative Request Report
Executive Memo
Fiscal Impact, Statement
County Attorney Email- May 20, 2011
Council Alternative Plan Savings
Amended Expedited Bill
11-11
Fire DROP Amendment
Circle
#
1
7
8
9
12
13
16
29
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Expedited Bill No.
---,1:....!.1-,-1:....!.1--=_ __
Concerning: Personnel - Retirement
Plans - Contributions
Revised: March 30, 2011 Draft No.1
Introduced:
April 5,
2011
Expires:
October 5,2012
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 Optional and Integrated Plans of the Employees' Retirement System to
increase member contributions;
(2)
amend the Guaranteed Retirement Income Plan of the Employee's Retirement
System and the Retirement Savings Plan to decrease employer contributions; and
(3)
generally amend the law regarding the employees' retirement system.
By amending
Montgomery County Code
Chapter 33, Personnel and Human Resources
Sections 33-39, 33-40 and 33-117
Boldface
Underlining
[Single boldface brackets]
QQuble underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bill.
Deleted from existing law by original bill.
Added by amendment.
Deleted from 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.II-ii
1
Sec.
1.
33-39.
(a)
Sections 33-39, 33-40, and 33-117 are amended as follows:
2
3
4
5
6
Member Contributions and Credited Interest.
Member contributions. Each member of the retirement system must
contribute a portion of the member's regular earnings through regular
payroll deductions.
(1) Member Contributions to the Optional Retirement Plan.
A
7
8
9
member of the Optional Retirement Plan must contribute the
following percentage of regular earnings: .
(A) Group A or H member, [6].s. percent;
(B) Group B member, 7 percent;
(C) Group D member,
7lh
perc;ent; and
(D) Group E, F, or G member,
[8lh] lOlh
percent.
(2) Member Contributions to the Integrated Retirement Plan. A
member of the Integrated Retirement Plan must contribute the
following percentage of regular earnings:
(A) Group A, [4]
§
percent up to the maXImum Social
Security wage base, and [6] .s. percent of regular earnings
that exceed the wage base;
(B) Group B,
4Y2
percent up to the maximum Social Security
wage base, and 7 percent of regular earnings that exceed
the wage base;
(C) Group E, [4%] 6% percent up to the maximum Social
Security wage base, and
[8lh] lOlh
percent of regular
earnings that exceed the wage base;
(D) Group F, [4 %] 6% percent up to the maximum Social
Security wage base and
[8lh] lOlh
percent of regular
earnings that exceed the wage base;
F:\LAW\BlLLS\llll Retirement Contributions\BiII I.Doc
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Expedited Bill No.II-II
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(E) Group G:
(i)
[SYZ] 7Yz
percent up to the maXImum Social
Security wage base, and
[9Jf4]
11
Jf4
percent of
regular earnings that exceed the wage base;
(ii) starting in the 25th year from the member's leave
accrual date under the County payroll system, [4%]
6% percent up to the maximum Social Security
wage base, and
[8Yz] 10Yz
percent of regular
earnings that exceed the wage base on and after the
member's 25th year of credited service;
(F) Group H, [4]
§.
percent up to the maximum Social
Security wage base and [6]
li
percent of regular earnings
that exceed the wage base.
33-40.
Employer Contributions.
*
(d)
*
*
Elected officials' plan. Subsections 33-40(a), (b), and (c) do not apply
to the elected officials' plan. Instead, the following provisions apply:
(1) The County must contribute to the elected officials' plan in
monthly installments, on behalf of each elected officials'
participant, an amount equal to [8]
Q.
percent of the elected
officials' participants' regular earnings. The county's elected
officials' contributions are to be adjusted to take into account
any forfeiture under subsection 33-40(d)(2)(D). In determining
the amount of the County elected officials' contributions, only
an elected officials' participant's regular earnings earned while
that elected officials' participant made required elected officials'
participant contributions are counted.
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Expedited Bill No.II-II
55
56
57
*
(e)
(1)
*
*
Guaranteed Retirement Income Plan.
Each pay period, the County must credit to each non-public
safety member's guaranteed retirement income plan account an
amount equal to [8%] 6% of the member's regular earnings.
The County must make a one-time credit equal to .36% of the
member's fiscal year 2010 regular earnings to the member's
guaranteed retirement income plan account on the second pay
period in July 2010 for a member who is on the County payroll
as of June 30, 2009 and who is also on the County payroll as of
June 30, 2010. Interest must be credited at an annual rate of
7.25% on the County contribution credits. If the annual 7.25%
interest rate does not comply with applicable law, the third
segment rate described in Internal Revenue Code Section
430(h)(2)(G) or any successor provision must apply. Interest
must be credited to a member's guaranteed retirement income
plan account balance on a monthly basis as of the last day of the
month.
(2)
Each pay period, the County must credit to each public safety
member's guarantee'd retirement income plan account an
amount equal to [10%] 8% of the member's regular earnings.
Interest must be credited at an annual rate of 7.25% on the
County contribution credits. If the annual 7.25% interest rate
does not comply with applicable law, the third segment rate
described in Internal Revenue Code Section 430(h)(2)(G) or
any successor provision must apply. Interest must be credited
58
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Expedited Bill No.II-ii
81
to a member's guaranteed retirement income plan account
balance on a monthly basis as of the last day of the month.
82
83
84
85
33-117.
(a)
Employer Contributions.
Amount of employer contributions.
(1)
Group I participants. The County must contribute to the
retirement savings plan in quarterly installments, on behalf of
each Group I participant, an amount equal to [8%] 6% of that
participant's regular earnings while a Group I participant during
a plan year. The County must make a one-time contribution of
.36% of the participant's fiscal year 2010 regular earnings on
the second pay period in July 2010 for a Group I participant on
the County payroll as of June 30, 2009 and who is also on the
County payroll as of June 30, 2010.
(2)
Group II participants. The County must contribute to the
retirement savings plan in quarterly installments, on behalf of
each Group II participant, an amount equal to [10%] 8% of that
participant's regular earnings while a Group II participant
during a plan year.
The County must make a one-time
86
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contribution of .36% of the participant's fiscal year 2010
regular earnings on the second pay period in July 2010 for a
Group II participant on the County payroll as of June 30, 2009
and who is also on the County payroll as of June 30, 2010.
100
101
102
103
Sec. 2.
Effective Date.
104
105
The Council declares that this legislation is necessary for the immediate
protection of the public interest. This Act takes effect on July 1,
2011
except as
otherwise provided. For a member of the Optional Plan, Integrated Plan, Elected
Officials' Plan, or Guaranteed Retirement Income Plan holding the office of
F:\LAW\BILLS\llll Retirement Contributions\Bili l.Doc
106
107
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Expedited Bill No.ll-11
108
County Executive, Councilmember, or Sheriff, the amendments to Sections 33­
39(a)(I), 33-39(a)(2), 33-40(d)(1) and 33-40(e)(1) take effect on December 1,
2014. For a member of the Optional Plan, Integrated Plan, Elected Officials' Plan,
or Guaranteed Retirement IncomePlan holding the office of State's Attorney, the
amendments to Sections 33-39(a)(1), 33-39(a)(2), 33-40(d)(1) and 33-40(e)(1) take
effect on January 5, 2015.
109
110
111
112
113
114
115
116
117
Approved:
Valerie Ervin, President, County Council
118
Date
Approved:
119
Isiah Leggett, County Executive
Date·
120
121
This is a correct copy a/Council action.
Linda M. Lauer, Clerk of the Council
Date
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LEGISLATIVE REQUEST REPORT
Expedited Bill
11
~
11
Personnel - Retirement Plans - Contributions
DESCRIPTION:
The requested legislation amends the County Retirement Law to
(1)
increase by 2 percent member contributions to the Optional and Integrated
Plans; (2) decrease by 2 percent employer contributions to the Guaranteed
Retirement Income Plan, the Elected Officials' Plan, and the Retirement
Savings Plan; and (3) generally make changes in the employees'
retirement system.
The County faces a severe budget shortfall for Fiscal Year 2012 and the
proposed legislation is part of the savings in the County Executive's
proposed budget.
PROBLEM:
GOALS AND
OBJECTIVES:
To statutorily implement savmgs contained m the County Executive's
proposed budget.
COORDINATION:
Office of Human Resources
FISCAL IMPACT:
Office of Management and Budget
ECONOMIC
IMPACT:
EVALUATION:
See OMB Fiscal Impact Statement.
nJa
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lOP
cc.
S6F
.1.-'­
06j.303
OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLE, MARYLAND 20350
Isiah Leggett
County Executive
MEMORANDUM
March 15,2011
co
TO:
Valerie Ervin, President
Montgomery County Council
Isiah Leggett, County Executive
Legislation to Modify the County Retirement Law
FROM:
SUBJECT:
I am submitting for Council consideration a bill that would amend the County's
Retirement Law to increase by two percent member contributions to the Optional and Integrated
Plans in the Employees' Retirement System, and to decrease by two percent employer
contributions to the Guaranteed Retirement Income Plan and Retirement Savings Plan in the
Employees' Retirement System. This bill implements a part of my recommended FY12
Operating Budget and is projected to save the County $10.9 million in FY12. I am attaching a
Legislative Request Report and Fiscal and Economic Impact Statement for the bill.
In light of constitutional concerns raised by the County Attorney, the changes for
elected officials in the Optional Plan, Integrated Plan, Elected Officials' Plan and Guaranteed
Income Plan would not become effective until December 2,2014, after the end of their current
terms.
c: Joseph Adler, Director, Office of Human Resources
Joseph Beach, Director, Office of Management and Budget
Kathleen Boucher, Assistant Chief Administrative Officer
Marc Hansen, County Attorney
montgomerycountymd.gov/311
··~311}
240-773-3556 TTY
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OFFICE OF MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
Joseph
F.
Beach
Director
MEMORANDUM
March 15,2011
TO:
FROM:
SUBJECT:
Valerie Ervin, President, County Council
Joseph F. Beach, Director"
Council Bill XX-II, Perso
el- Retirement Plans - Contributions
The purpose ofthis memorandum is to transmit a fiscal and economic impact statement
to the Council on the subject legislation.
LEGISLATION SUMMARY
Expedited Bill XX-II amends the Optional and Integrated Plans ofthe Employees'
Retirement System (ERS) to increase member contributions, amends the Guaranteed Retirement Income
Plan (GRIP) ofthe Employee's Retirement System and the Retirement Savings Plan (RSP) to decrease
employer contributions, and generally amends the law regarding the employees' retirement system.
FISCAL AND ECONOl\tllC SUMMARY
There is a fiscal impact resulting from this legislation. The County Executive's FY12
Recommended Operating Budget includes the following savings:
2% Employee Increase in ERS Contributions
2% Employer Reduction
in
GRIP Contributions
2% Employer Reduction in RSP Contributions
Total
-$6,044,180
-$1,l38,130
-$3,722,160
-$10,904,470
These budgetary savings are net of a total FY12 County cost for the retirement benefit of
$117,926,100. These are permanent, on-going reductions in the cost of employee benefits which will
change as employee compensation changes over time.
The impact on the individual employee varies, depending on the type of plan in which
they are enrolled. For the ERS, a defmed benefit plan, to maintain the same level of benefit at retirement,
the proposed legislation requires an increase to employee contributions of two percent of covered
compensation. For RSP and GRIP, savings are realized through a reduction in the employer contribution
of two percent of covered compensation.
Office of the Director
101 Monroe Street, 14th Floor' Rockville, Maryland 20850 • 240-777-2800
www.montgomerycountymd.gov
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Valerie Ervin, President, County Council
March 15,2011
Page 2
The Department of Finance reports that the proposed bill may affect the take-home pay
for certain County employees who live in the County because of the increase in their contribution under
the Optional Retirement Plan or the Integrated Retirement Plan. However, the legislation
has
no
significant economic impact since any reduction in take-home pay for this group of employees is small
relative to the Montgomery County economy as a whole.
Other Changes
These retirement changes are in addition to changes to the group health plan. The County
Executive's FY12 Recommended Operating Budget also includes group health savings, most
significantly from 311 increased employee cost share for the benefit. Under the County Executive's
Recommended Budget, in addition to salary-based premiums (described below), the County pays up to
70% of the cost of the premiums for the benefits listed below and all employees must pay a base-level
30% of the cost of the premiums for:
o
o
o
o
o
o
Health
Dental
Vision
Prescription Drug (standard plan). High Option plan participants stilI.buy up.
Life Insurance
Long Term Disability
In addition, part-time and full-time employees whose annualized base salary is equal to or
over $50,000 and under $90,000 must pay an additional premium of $35.00 each pay period if they enroll
in a health plan or a prescription drug plan.
If
their annualized base salary.is equal to $90,000 and above
they must pay an additional premium of $60.00 each pay period.
Finally, there is also savings in the CE's Recommended Budget from the following
prescription and life insurance plan changes:
o Mandatory generics. If a participant chooses to receive a brand name prescription
drug that has a generic equivalent, even
if
their doctor specifies that the prescription
be dispensed as written, the participant must pay the generic co-pay plus the
difference between the cost of the brand name drug and the generic drug.
o Participants receiving prescriptions by mail order must pay two copayments for up to
a 90 day supply.
o The County's prescription drug benefit will no longer cover reimbursement for' any
of the drugs specifically approved by the Food and Drug Administration for the
treatment of erectile dysfunction.
o Employees eligible for life insurance coverage must have term life insurance
coverage equal to one times their basic annual salary.
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Valerie Ervin, President, County Council
March 15,2011
Page
3
Projected FY12 and Outyear Savings
Projected budget year and outyear savings from these cost share, program, and contribution
changes are as follows: '
Retirement and Group Health Savings Summary
FY12 -FY17
Savings ($ in millions)
FY12
2% Employee Increase in ERS Contributions
I
2% Employer Reduction
in
GRlP
Contributions
I
2% Employer Reduction in RSP Contributions
1
Three-tiered Cost Sharing Arrangement!
Prescription Plan Design Changes
Total
2
FY13
~$6.2
~$6.0
FY14
-$6.3
~$12
FY15
-$6.4
-$1.2
-$3.9
FY16
~$6.5
FY17
-$6.7
-$1.3
-$4.1
-$1.1
-$3.7
-$1.2
~$3.8
-$1.2
-$4.0
-$3.9
-$18.7 -$20.6 -$22.6 -$24.9 -$27.4 -$30.1
-$29.6 -$31.7 -$34.0 -$36.5 -$39.2 -$42.1
1
Outyear savings are projected to grow
by
the
cpr
-U for the BaltimorelWashington area (Source: Montgomery County
Department ofFinance).
2
Outyear savings are projected to grow
by
the assumed growth in group health claims, premiums, and administrative
cost growth, as projected
by
Aon Hewitt.
The following contributed to and concurred with this analysis: Lori O'Brien, Office of
Management and Budget; David Platt, Department ofFinance; and Wesley Girling, Office of Human Resources.
JFB:loh
c: Kathleen Boucher, Assistant Chief Administrative Officer
Lisa Austin, Offices of the County Executive
Jennifer Barrett, Director, Department of Finance
Joseph Adler, Director, Office of Human Resources
Linda Herman, Director, Board ofInvestment Trustees
Wesley Girling, Office of Human Resources
David Platt, Department of Finance
Michael Coveyou, Department of Finance
John Cuff, Office of Management and Budget
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Page 1 of 1
Drummer, Bob
From:
Sent:
To:
Cc:
Hansen, Marc P.
Friday, May 20, 2011 5:02 PM
Farber, Steve
Moskowitz, Amy; Drummer, Bob; Beach, Joseph; Barrett, Jennifer; Firestine, Timothy
Subject: Councilmember retirement and health benefits-changes
Steve-
You have asked me to contil111 OCA s prior advice that the County Executive s proposed changes to
retirement and health benefits may not legally be applied to Councilmembers. Changes to the
retirement and health plans for County employees may not be legally imposed on COlmcilmembers,
because Art.
llt
§
35 of the Maryland Constitution prohibits an increase or decrease in compensation for
an elected official during the official s tenn of oftlce.
The Attorney General has concluded that changes to an official s health plan can not apply during the
official s tenn of office, because fringe benefits ... are valuable perquisites of an office, and are as much a
part of the compensations of office as a weekly pay check. 78 Op. Atty Gen. Md. 296 (January 4, 1993).
Although this same 1993 Attorney General s opinion deemed a mid-tenn grant to an elected official of a
pension benefit as pernlitted, the pension benefit in question was a non-contributory pension plan that had no
impact on the compensation received by the official during the official s tenn of office. The Attorney
General considered a non-contributory pension different from compensation because it was not received
during the tenn of office, and pensions have different characteristics from compensation. The AG cited case
law providing that pensions are uncertain as to whether the pension would be received and the amount to be
received. However, tbe County s GRLP and Elected Official s Plans are contributory pension plans, which
are vested in the elected official once earned. With respect to Councilrnernbers who are members of the
defined benefit plan any increase in the participant s contributions to the ERS would reduce the official s
take home pay.
Councilmembers may chose to contribute to the County the amount their compensation would have
been reduced had they been regular County employees.
Marc P. Hansen
County Attorney
Montgomery County, Maryland
240-777-6740
CONFIDENTIALITY NOTICE: The contents of this email may be confidential under the attorney-client privilege,
the work-product doctrine, or other applicable law. If you have received this email in error, you may not copy,
distribute, or use its contents, and you are requested to delete the email from your system immediately and notify
the sender at 240-777-6700. Thank you.
5120/2011
@
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Further Details of Council's Package
Implementation dates:
---
group insurance changes take effect on January 1, 2012. Retirement changes take effect on July 1, 2011.
------
Benefit Type
County Government
Council's Package
Comparisons
to
Executive's Proposal
&
General Assembly's Actions
Estimated
FY12 Savings
Health Benefits
for Active
Employees
Premium Cost Share. Adopt preferential pricing for lower
cost plans by maintaining employee cost share at 20% for
HMOs; and increasing employee cost share for the POS
medical plan (CareFirst) as well as dental, vision, and stand-
alone standard prescription drug plans from 20%
to
25%.
Maintain the current practice of allowing employees to
"buy-up" and purchase high option prescription coverage.
Coverage changes. Employees who buy a brand name
drug when a generic equivalent is available pay the generic
drug copay plus the difference between the cost of the
brand name drug and its generic equivalent, unless the
physician supplies a letter of medical necessity. In addition,
employees would receive limited coverage of erectile
dysfunction drugs.
i
The Council's package reduces the Executive's
proposed cost share increase
to
employees,
eliminates the salary-based surcharge, and adopts a
cost containment strategy- already used by MCJ>S
- of preferential pricing for lower cost HMOs.
$2,100,000
I
Prescription Drug
(plan design
changes)
The Council's package moderates the Executive's
proposal by including a generic drug waiver
provision based on medical necessity and limiting
(not eliminating) erectile dysfunction drug
coverage. This modification results in a plan
design that parallels MCJ>S' current practice.
$703,000
I
Life Insurance
Mail-OrderCopays. Maintain the current copayfor
mail
order prescriptions up
to
a 90-day supply (instead of
increasing from one time to two times the copay for a 30­
day supply purchased at a retail pharmacJ1. In addition,
apply mail-order copayto direct purchase of long-term
maintenance drugs (up to a 90-daysupplJ1 at CVS retail
pharmacies.
Cost Share and Benefit Level. The life insurance benefit
provided to all employees
is
reduced from two times to one
time annual salary. Employees' cost share increases from
20% to 25% of premium.
Cost Share. Employees' cost share for long-term disability
insurance increases from 20% to 25% of premium.
The Council's package eliminates the Executive's
proposal
to
double the copay for
mail
order
prescriptions, and adds the provision on
maintenance medication purchased at CVS retail
pharmacies (not included by the Executive).
None
This structural change in benefit level was
proposed by the Executive; the Council's package
reduces the Executive's proposed cost share
increase to employees.
The Council's package reduces the Executive's
proposed cost share increase to employees.
$600,000
Long-Term
Disability
L-___
$12,000
®
(continued on next page)
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Further Details of Council's Package (continued)
Isenefit Type
Retirement:
Defined
Contribution
Plan
Qmncil's Package
Comparison to Executive's Proposal
&
General Assembly's Actions
The Council's package modifies the Executive's
proposal by making the defined contribution
reduction a one-time as opposed to a pennanent
change. MCGEO included this one-time change in
its last best final offer.
The Council's package phases in the Executive's
proposed increase of 2% in employee
contributions over two years. This year, the
General Assembly similarlyincreased employee
contributions to State-run pension plans by2%.
This year, the General Assembly adopted a
reduced COLA provision for new hires and
current employees (for years not yet served) who
participate in the State-run pension plans. This
structural change was not proposed by the
Executive.
Estimated
FY12 Savings
Defined Contribution. The County reduces its
contribution to employee retirement accounts from 8% to
6% in FY12 only.
$4,860,000
Defined Benefit - employee contribution. In FY12,
employees contribute an additional 1% of salary towards
their pensions; in FY13 employee contributions increase
another 1% for a total of 2%.
$3,022,090
Retirement:
Defined Benefit
Defined Benefit - COLA provision. The County caps
future COLAs for new hires and for current employees (for
years not yet served) at 100% of CPI up to a maximum
annual increase of 2.5%.
$3,150,000
Defined Benefit - structure of benefit for new hires. In
This
year, the General Assembly adopted changes
June, the Council
will
also consider changes to the structure to the structure of the defined benefit pension for
of the defined benefit plan components (e.g., vesting period, new hires enrolled in State-run pension plans.
This structural change was not proposed by the
, pension fonnula) for new public safety hires, with the goal
of having changes in place by October 1, 2011.
Executive.
Eligibility and Cost Share. For employees hired after July
1,2011, eligibility for retiree health benefits increases to a
This
year, the General Assembly adopted changes
to retiree health eligibility and cost share.
This
minimum of 10 years of service for a cost share of 50/50,
structural change was not proposed by the
and 25 years of service to receive the maximum cost share
of 70/30. For each year of service in-between 10 and 25, the Executive.
County's share increases 1.33%.
FY12 and
future year
savings
will
depend on
changes
adopted
Reduction in
the Countis
OPEB liability
begins in
FY13
Retiree Health
Benefits
Subtotal: FY12 MCG Savings
I
$14.45 million
(continued on next page)
®
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Further Details of Council's Package (continued)
The Council recognizes that decisions about MCPS employee benefits are the Board of Education's to make. As stated in his
March 15 budget transmittal memo, the Executive recommended that all agencies adjust employee health insurance and retirement
benefit structures "to promote equity among locally funded public employees." This page identifies savings that would result if
the Board of Education takes action to modify employee benefit structures according to the examples described in the table below.
-~
Benefit Type
Montgomery Omnty Public Schools
Health Benefits
for Active
Employees
Examples of Change
Estimated
FYUSavings
Premium O:lst Share: Employees' cost share for HMOs increases from 5% to 10%; employees' cost share for
all other plans increases from 10% to 15%. lhis structural change assumes a continuation of MCPS' cost
containment practice of preferential pricing for HMOs.
Defined Benefit. Board of Education adjusts pension benefits in the locally-funded Gxe plan
to
parallel
changes made by the General Assembly to the State-run pension plans (increase employee contributions and cap
future CDLAs for new hires and current employees), and increases the employee contribution to the locally­
funded Supplement to maintain the same proportion of employee contributions for the Supplement and for State
and local Core plans.
1his
structural change is consistent with the Board of Education's past practice of applying
changes made by the State
to
the Teachers' Retirement/Pension Systems to the MCPS-run and locally-funded
pension plans.
Subtotal: FYU MCPS Savings
$7,000,000
Retirement:
Locally-Funded
Plans (Core and
Supplement)
$11,700,000
$18.70 million
L...--..__,"_,_
COMPARISON OF TOTAL SAVINGS
($
in millions)
FY12
Executive's Proposal:
Council's Package:
$29.60
$33.15
FY12-FY17
$214.83
$273.10
®
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Expedited Bill No.
--,1~1~-1~1
_ _ __
Concerning: Personnel - Retirement
Plans - Contributions
Revised: May 23, 2011 Draft NO.=3_ _
Introduced:
April 5, 2011
Expires:
October 5,2012
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 Optional and Integrated Plans of the Employees' Retirement System to
increase member contributions;
(2) amend the Guaranteed Retirement Income Plan of the Employee's Retirement
System and the Retirement Savings Plan to decrease employer contributions and
permit an additional after-tax employee contribution in Fiscal Year 2012; [and]
(3) amend the cost-of-living provisions in the Optional anci
Integrate~ans
of the
Employees' Retirement System and the Disability Benefits elan of the Retirement
Sglvings Plan; and
Bl
generally amend the law regarding the employees' retirement system.
By amending
Montgomery County Code
Chapter 33, Personnel and Human Resources
Sections 33-39, 33-40, 33-44, 33-11Ck[[and]]
33-117,.j]~1l8~nd
33-131
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.II-ii
1
Sec. 1.
Sections 33-39, 33-40, 33-44, 33-116, [(and]] 33-117,33-118,
2
3
4
and 33-131 are amended as follows:
33-39.
Member Contributions and Credited Interest.
(a)
Member contributions. Each member of the retirement system must
contribute a portion of the member's regular earnings through regular
payroll deductions.
(1)
Member Contributions to the Optional Retirement Plan.
A
5
6
7
8
9
10
11
member of the Optional Retirement Plan must contribute the
following percentage of regular earnings:
(A)
Group A or H member,
[6]
7 percent for service after
June 30, 2011 and.8. percent for service after June 30. 2012;
(B)
(C)
(D)
Group B member, 7 percent;
Group D member, 7Y2 percent; and
Group E, F, or G member, (8Y2] 9Y2 percent for service
12
13
14
15
after June 30. 2011 and 101;2 percent for service after June 30,
2012.
(2)
Member Contributions to the Integrated Retirement Plan. A
member of the Integrated Retirement Plan must contribute the
following percentage of regular earnings:
(A)
Group A,
[4]
5 percent for service after
Jun~
30. 2011
and
.6.
percent for service after June 30. 2012 up to the
maximum Social Security wage base, and
[6]
7 percent
for service after June 30. 2011 and .8. percent for service
after June 30. 2012 of regular earnings that exceed the
wage base;
16
17
18
19
20
21
22
23
24
25
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Expedited Bill No.II-ii
26
27
(B)
Group B,
4Y2
percent up to the maximum Social Security
wage base, and 7 percent of regular earnings that exceed
the wage base;
28
29
30
31
(C)
Group E, [4%] 5% percent for service after June 30. 2011
and 6% percent for service after June 30. 2012 up to the
maximum Social Security wage base, and [8
Y2] 9Y2
percent for service after June 30. 2011 and
10Y2
percent
for service after June 3Jl]012 of regular earnings that
exceed the wage base;
32
33
34
35
36
37
(D)
Group F, [4 %] 5% percent fors.rn:::ice after June 30. 2011
and 6% percent forservice after June 30. 2012 up to the
maximum Social Security wage base and
[8Y2] 9Y2
percent forservice after June 30. 20
II
and
10Y2
percent
for service after June 30, 2012 of regular earnings that
exceed the wage base;
38
39
40
41
(E)
Group G:
(i)
42
[5Y2] 6Y2
percent for
servic~~ne
30. 2011
43
44
45
and
7Y2
percent for service after June 30. 2012 up
to the maximum Social Security wage base, and
[9~] 10~
percent for service after June 30, 2011
46
47
48
49
amI
11
~
percent for service after June 30. 2012
of regular earnings that exceed the wage base;
(ii)
starting in the 25th year from the member's leave
accrual date under the County payroll system, [4%]
5% percent for service after June 30. 20
II
and 6%
percent for service after June 30, 2012 up to the
maximum Social Security wage base, and
[8Y2] 9Y2
-3­
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50
51
52
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Expedited Bill No.11-11
53
54
55
percent for service after June 30, 2011 and
10Yl
percent for service after June 30. 2011 of regular
earnings that exceed the wage base on and after the
member's 25th year of credited service;
(F)
Group
H,
[4]
5 percent for service after June 30. 2011
and
Q
percent for service after June 30. 2012 up to the
maximum Social Security wage base and [6] 7 percent
for service after June 30. 2011 and
~
56
57
58
59
60
61
percent for service
after June 30, 2012 of regular earnings that exceed the
wage base.
62
63
*
(4)
plan.
(A)
*
*
64
65
66
Member contributions to the guaranteed retirement mcome
A non-public safety employee member in the guaranteed
retirement income plan must contribute 4% of regular
earnings less than or equal to the Social Security wage
base and 8% of regular earnings that exceed the Social
Security wage base.
67
68
69
70
71
(B)
A public safety employee member in the guaranteed
retirement income plan must contribute 3% of regular
earnings less than or equal to the Social Security wage
base and 6% of regular earnings that exceed the Social
Security wage base.
72
73
74
75
76
77
78
(C)
For service performed after June 30, 2011. and before
July Ib20
12,
a member may contribute an additional 2%
of regular earnings on an after-tax basis by making an
- 4-
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Expedited Bill No.II-II
79
80
81
82
83
irrevocable election in writing on or before September 1,
2011.
!Ill
To the extent allowed under Section 414(h)(2) of the
Internal Revenue Code, the County must "pick up" (as
described in the Internal Revenue Code) member
contributions to the guaranteed retirement income plan.
A
member
is
always
vested
in
the
member's
84
85
86
87
contributions.
([(D))]
LID
When a member reJOInS County servIce after
88
89
military service that qualifies under Section 33-41(q) as
credited service, the County must credit the member with
the amount that the member would have contributed if
the member had worked for the County during military
s~rvice.
90
91
92
Contribution credits for military service must be
93
94
based on the regular earnings the member would have
earned during military service. If the regular earnings are
not reasonably ascertainable, the credit must be based on
the
member's
regular
earnings
during
a
period
The
95
96
97
98
immediately preceding the military service.
averaging period is 12 months, or the full length of the
member's County service, whichever is shorter.
The
99
100
101
102
103
104
105
member must not receive any retroactive credited interest
on the contribution credits. The County must not credit a
member with a discretionarv after-tax contribution 1.mder
subparagraph C unless the member elects to make up the
contribution under Internal Revenue Code Section
414(u), as amended.
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Expedited Bill No.ll-ll
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
*
33-40.
*
*
*
*
Employer Contributions.
*
(d)
Elected officials' plan. Subsections 33-40(a), (b), and (c) do not apply
to the elected officials' plan. Instead, the following provisions apply:
(1)
The County must contribute to the elected officials' plan in
monthly installments, on behalf of each elected officials'
participant, an amount equal to [8]
[[Q]]
~
percent of the elected
officials' participants' regular earnings. The county's elected
officials' contributions are to be adjusted to take into account
any forfeiture under subsection 33-40(d)(2)(D). In determining
the amount of the County elected officials' contributions, only
an elected officials' participant's regular earnings earned while
that elected officials' participant made required elected officials'
participant contributions are counted.
*
(e)
(1)
*
*
Guaranteed Retirement Income Plan.
Each pay period, the County must credit to each non-public
safety member's guaranteed retirement income plan account an
amount equal to [8%] 6%
fur
service after June 30, 2011 and
S% for service after June 30, 2012 of the member's regular
earnings. [[The County must make a one-time credit equal to
.36% of the member's fiscal year 2010 regular earnings to the
member's guaranteed retirement income plan account on the
second pay period in July 2010 for a member who is on the
County payroll as of June 30, 2009 and who is also on the
County payroll as of June 30, 2010.]] Interest must be credited
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Expedited Bill No.11-1I
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
at an annual rate of 7.25% on the County contribution credits. If
the annual 7.25% interest rate does not comply with applicable
law, the third segment rate described in Internal Revenue Code
Section 430(h)(2)(G) or any successor provision must apply.
Interest must be credited to a member's guaranteed retirement
income plan account balance on a monthly basis as of the last
day of the month.
(2)
Each pay period, the County must credit to each public safety
member's guaranteed retirement income plan account an
amount equal to [10%] 8% for service after June 30, 2011 and
10% for service after June 30, 2012 of the member's regular
earnings. Interest must be credited at an annual rate of 7.25%
on the County contribution credits. If the annual 7.25% interest
rate does not comply with applicable law, the third segment rate
described in Internal Revenue Code Section 430(h)(2)(G) or
any successor provision must apply. Interest must be credited
to a member's guaranteed retirement income plan account
balance on a monthly basis as of the last day of the month.
33-44. Pension payment options and cost-of-living adjustments.
*
(c)
*
*
Cost-ol-living adjustment.
A retired member or beneficiary, including
the surviving spouse or domestic partner of a group D member or
other beneficiary who survives the member under a pension option or
who is otherwise eligible to receive benefits, must receive an annual
cost-of-living adjustment in pension benefits.
(1)
Each retired member or beneficiary [[shall]] must have a cost­
of-living base which [[shall]] !TIust be the Consumer Price
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Expedited Bill No.II-ii
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
Index most recently preceding the date of the member's
retirement or death.
(2)
The Consumer Price Index to be used for the fiscal year in
which the cost-of- living adjustment is payable [[shall]] must be
the index calculated for the month last preceding the end of the
fiscal year immediately preceding the fiscal year in which the
adjustment is to be effective.
(3)
The percentage cost-of-living adjustment of pension benefits
must be obtained by dividing the most recent index determined
under paragraph (2) by the next preceding index multiplied by
100 less 100.
(A)
A member enrolled before July 1, 1978, must receive the
full cost-of- living adjustment.
(B)
A member enrolled on or after July 1, 1978, must receive
100 percent of the change in the consumer price index up
to 3 percent, and 60 percent of any change in the
consumer price index greater than 3 percent, up to a total
adjustment of 7 Y2 percent in any year. The 7 Y2 percent
annual limit does not apply to:
(i)
(ii)
a retired member who is disabled; or
a pensioner aged 65 or older for a fiscal year
beginning after the date the pensioner reaches age
65.
(4)
For the purpose of this section, "Consumer Price Index" [[shall
mean)) means, beginning January 1, 1978, the Consumer Price
Index for All Urban Consumers issued for the Washington,
D.C. Metropolitan Area (all items) as published by the United
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Expedited Bill No.ll-ll
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~
States Department of Labor, Bureau of Labor Statistics (for
months before 1978, the Consumer Price Index published
previously for urban wage earners and clerical workers for such
months [[shall]] must be applicable.)
(5)
Pension benefits are subject to decreases in the Consumer Price
Index. In no instance, however, [[shall]] must a retired member
or beneficiary receive less than the amount of pension benefits
for which eligible at the time of the member's retirement.
Notwithstanding the provisions of this Section, the
liYing
adjustment must not exceed 2.5% for:
(A)
cost-of~
credited service performed after June 30, 2011: or
a disability retirement pension based upon a disability
occurring after June 30, 2011.
an
33-116.
*
(a)
*
*
Participant contributions.
Percent of participant contributions.
(1)
(A)
Group
1.
Each participant in Group I must contribute,
through regular payroll deductions, 4% of regular
earnings less than or equal to the Social Security wage
base and 8% of regular earnings that exceed the Social
Security wage base.
(B)
Group
II.
Each participant in Group II must contribute,
through regular payroll deductions,
3%)
of regular
earnings less than or equal to the Social Security wage
base and 6% of regular earnings that exceed the Social
Security wage base.
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Expedited Bill No.II-II
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fi:l
For service perfonned after June
30~
20 11 and before
July 1. 2012. a participant may contribute an additional
2% of regular earnings on an' after-tax. basis by making
an irrevocable election in writing on or before September
I,
2011.
*
(4)
*
*
The County must contribute on behalf of a participant who
rejoins County service after military service that qualified under
Section 33-119(b) as credited service an amount equal to the
amount that the participant could have contributed if the
participant had worked for the County during the period of
military service.
(A)
Contributions for the period of military service must be
based on the regular earnings the participant would have
earned during the period of military servIce.
amount
of
regular
earnmgs
IS
If this
not
reasonably
ascertainable, the contribution must be based on the
participant's average regular earnings during a period
immediately preceding military service. The averaging
period is 12 months, or the full length of the participant's
County service, whichever is shorter.
(B)
Contributions under this paragraph count toward the
maximum annual contribution limits under the Internal
Revenue Code for the year for which the contributions
relate.
(C)
The participant
IS
not entitled to any retroactive
allocation of forfeitures or any retroactive crediting of
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Expedited Bill No.II-II
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earmngs
because
of
contributions
under
this
subparagraph.
(ill
The County must not credit a participant with a
discretionary
after-tax
contribution
under. Section
(b)(l)(C) unless the participant elects to make up the
contribution under Internal Revenue Code Section
414(u). as amended.
*
33-117.
Employer Contributions.
*
*
(a)
Amount of employer contributions.
(1)
Group I participants. The County must contribute to the
retirement savings plan in quarterly installments, on behalf of
each Group I participant, an amount equal to [8%] 6%
for
service after June 30, 2011 and 8% for service after June 30.
2012 of that participant's regular earnings while a Group I
participant during a plan year. [[The County must make a one­
time contribution of .36% of the participant's fiscal year 2010
regular earnings on the second pay period in July 2010 for a
Group I participant on the County payroll as of June 30, 2009
and who is also on the County payroll as of June 30,2010.]]
(2)
Group II participants. The County must contribute to the
retirement savings plan in quarterly installments, on behalf of
each Group II participant, an amount equal to [10%] 8% for
service after June 3Q, 2011 and 100/0 for service
a&r
June 30
1
2012 of that participant's regular earnings while a Group II
participant during a plan year. [[The County must make a one­
time contribution of .36% of the participant's fiscal year 2010
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Expedited Bill No.1 1-11
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regular earnings on the second pay period in July 2010 for a
Group II participant on the County payroll as of June 30, 2009
and who is also on the County payroll as of June 30, 2010.)]
*
33-118.
(a)
Contribution limitations.
(1)
*
*
Maximum Annual Contribution
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Notwithstanding any other provision in this Division, to the
extent required under the Internal Revenue Code, the annual
additions described in this Section that are allocated in any
limitation year to the retirement accounts of any participant
must not exceed the lesser of:
(A)
$30,000, effective January 1, 1995, or $40,000, effective
January 1, 2002 (the "dollar limitation"), as adjusted by
the Internal Revenue Service from time to time to reflect
cost of living increases; or
(B)
25 percent of the participant's compensation as defined
below, or 100 percent of the participant's compensation,
effective January 1, 2002, (the "percentage limitation").
(2)
For purposes of this Section, the annual addition must be:
(A)
(B)
(C)
County contributions;
required participant contributions; [[and]]
forfeitures, but only if the retirement savings plan permits
forfeitures to be added to the participant's account; and
(D)
after-tax contributions.
*
33-131. Amount of benefits.
*
*
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*
*
*
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Expedited Bill No.II-ll
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(C)
Cost-ol-living adjustments.
The administrator must make a cost-of­
living adjustment annually to the disability benefits paid to any public
safety employee under this plan. The cost of living adjustment must
be equal to 60% of the annual increase in the Baltimore-Washington
Area Consumer Price Index. However, the disability cost-of-living
increase must not increase the disability benefits by more than 3%
each 12-month period.
A non-public safety employee must not
receive a cost-of-living adjustment for any benefit paid under this
plan. The cost-of-living adjustment for a disi:lbility benefit based upon
a disability occurring after June 30, 2011 must not exceed 2.5%.
Sec. 2.
Effective Date.
The Council declares that this legislation is necessary for the immediate
protection of the public interest. This Act takes effect on July 1, 2011 except as
otherwise provided. For a member of the Optional Plan, Integrated Plan, [[Elected
Officials' Plan,]] or Guaranteed Retirement Income Plan holding the office of
County Executive, Councilmember, or Sheriff, the amendments to Sections 33­
39(a)(1), 33-39(a)(2), 33-44(ct [[, 33-40(d)(1)]] and 33-40(e)(1) take effect on
December 1, 2014. For a member of the Optional Plan, Integrated Plan, [[Elected
Officials' Plan,]] or Guaranteed Retirement Income Plan holding the office of
State's Attorney, the amendments to Sections 33-39(a)(1), 33-39(a)(2), 33-44(c),
[[,
313
314
315
33-40(d)(1)]] and 33-40(e)(1) take effect on January 5,2015.
316
317
318
Approved:
Valerie Ervin, President, County Council
Date
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Fire DROP Amendment
Add the following after line 2:
33-38A. Deferred Retirement Option Plans.
The Chief Administrative Officer must establish Deferred Retirement Option Plans, or
DROP plans, that allow any employee who is a member of a specified membership group or
bargaining unit and who meets the eligibility requirements to elect to retire but continue to work.
Pension payments must not be paid to the member while the member participates in the DROP
Plan. When the member's participation in the DROP Plan ends, the member must stop working
for the County, draw a pension benefit based on the member's credited service and earnings as of
the date that the member began to participate in the DROP Plan, and receive the value of the
DROP Plan payoff.
*
(b)
*
*
*
*
DROP Plan for Group
G
members.
*
(5)
(A)
Retirement date, retirement contributions, and credited service.
The retirement date of a member who participates in the DROP
Plan is the date when the employee begins to participate in the
DROP Plan.
(B)
The member
[[will]]
must
continue to
make retirement
contributions to the Optional Plan or Integrated Plan while
participating in the DROP Plan. Members in the Optional Plan
must contribute 8 12 percent of reguhlr earning. Members in the
Integrated Plan must contribute:
ill
5 12 percent up to the maximum Social Security wage base,
and 9
%;f
percent of regular earnings that exceed the wage
base; and
!ill
starting in the 25th year from the.member's leave accrual
date under the Countvpmcll system, 4
~
percent up to the
maximum Social Security wage base, and 8 Y2 percent of
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regular earnings that exceed the wage base on and after the
member's
~5th
year of credited service;
The County must not make retirement contributions on behalf of
the member after the date on which the member's DROP Plan
participation begins.
(C)
Sick leave credited towards retirement at the beginning of the
member's participation [[will]] must not be available for the
member's use after participation in the DROP Plan begins.
(D)
A member who wishes to purchase prior service must do so before
the member's participation in the DROP Plan begins.
*
*
*
2