Agenda Item 8
April 5,2011
Introduction
MEMORANDUM
April 1, 2011
TO:
FROM:
SUBJECT:
County Council
Robert
H.
Drummer, Senior Legislative Attorne
y
fi0
Introduction:
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, is scheduled to be introduced on April
5,2011. A public hearing is tentatively scheduled for April 26 at 7:30 p.m.
Bill 11-11 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) 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. 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 FY12 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 1, 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
subject to Article III, §35 of the Maryland Constitution.
This packet contains:
Expedited Bill 11-11
Legislative Request Report
Executive Memo
Fiscal Impact Statement
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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. _ __
I
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]
DQublfLUDderlining
[[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.ll-ll
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Sec. 1.
33-39.
(a)
Sections 33-39, 33-40, and 33-117 are amended as follows:
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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
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7
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member of the Optional Retirement Plan must contribute the
following percentage of regular earnings:
(A) Group A or H member, [6]
~
percent;
(B) Group B member, 7 percent;
(C) Group D member,
7lh.
per~ent;
and
(D) Group E, F, or G member,
[8lh.]
IOlh.
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] Q percent up to the maXimum Social
Security wage base, and [6]
that exceed the wage base;
(B) Group B,
4lh.
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.]
IOlh.
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.]
IOlh.
percent of regular
earnings that exceed the wage base;
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percent of regular earnings
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Expedited Bill No.II-II
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(E) Group G:
(i)
[5Y2] 7Y2 percent up to the maXImum Social
Security wage base, and [91;4] 111;4 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
[8Y2]
10Y2 percent of regular
earnings that exceed the wage base on and after the
member's 25th year of credited service;
(F) Group H, [4]
Q
percent up to the maximum Social
Security wage base and [6]
that exceed the wage base.
~
percent of regular earnings
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
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*
(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
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Expedited Bill No.II-ii
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to a member's guaranteed retirement income plan account
balance on a monthly basis as of the last day of the month.
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
.360/0 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%] 80/0 of that
participant's regular earnings while a Group II participant
during a plan year.
The County must make a one-time
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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.
Sec. 2.
Effective Date.
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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
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Expedited Bill No.ll-l1
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County Executive, Councilmember, or Sheriff, the amendments to Sections 33­
39(a)(1), 33-39(a)(2), 33-40(d)(l) 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)(I), 33-39(a)(2), 33-40(d)(1) and 33-40(e)(1) take
effect on January 5, 2015.
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Approved:
Valerie Ervin, President, County Council
118
Date
Approved:
119
Isiah Leggett, County Executive
Date
120
This is a correct copy ofCouncil action.
121
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 in the County Executive's
proposed budget.
COORDINATION:
Office of Hurnan Resources
FISCAL IMPACT:
Office of Management and Budget
ECONOMIC
IMPACT:
EVALUATION:
See OMB Fiscal Impact Statement.
nla
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!bD
c.c.
S8F
J-L­
061303
OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLE, Jl.IARYLAND 20850
Isiah Leggett
County Executive
MEMORANDUM
March 15,2011
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
lli
IUHJIj,i.¥.,i•.
''';~~:y¥;7
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, Coun!}' Council
Joseph F. Beach, Directo
t.
Retirement Plans - Contributions
The purpose of this 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 of the Employees'
Retirement System (ERS) to increase member contributions, amends the Guaranteed Retirement Income
Plan (GRIP) of the 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 ECONOMIC 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
-$6,044,180
-$1,138,130
-$3,722,160
Total
-$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,
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
a:n
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 still 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 $60.00 each pay period.
Finally, there is also savings in the CE's Recommended Budget from the following
prescription and life insurance plan changes:
o Mandatory generics. If a participant chooses to receive a brand name prescription
drug that has a generic equivalent, even iftheir doctor specifies that the prescription
be dispensed as written, the participant must pay the generic co-pay plus the
difference between the cost of the brand name drug and the generic drug.
o Participants receiving prescriptions by mail order must pay two copayments for up to
a 90 day supply.
o
The County's prescription drug benefit will no longer cover reimbursement for' any
of the drugs specifically approved by the Food and Drug Administration for the
treatment of erectile dysfunction.
o Employees eligible for life insurance coverage must have term life insurance
coverage equal to one times their basic annual salary.
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Valerie Ervin, President, County Council
March 15,2011
Page 3
Projected FY12 and Outyear Savings
Projected budget year and outyear savings from these cost share, program, and contribution
changes are as follows:
Retirement and Group Health Savings Summary
FY12-FY17
Savings ($ in millions)
FY12
-$6.0
-$1.1
-$3.7
FY13
-$6.2
-$1.2
-$3.8
FYI4
-$6.3
-$1.2
-$3.9
FYI5
-$6.4
-$1.2
-$3.9
FYI6
-$6.5
-$1.2
-$4.0
FYI7
-$6.7
-$1.3
-$4.1
2% Employee Increase in ERS Contributions
I
2% Employer Reduction in GRlP
Contributions
1
2% Employer Reduction in RSP Contributions
l
Three-tiered Cost Sharing Arrangement!
Prescription Plan Design Changes
Total
2
-$18.7 -$20.6 -$22.6 -$24.9 -$27.4 -$30.1
-$29.6 -$31.7 -$34.0 -$36.5 -$39.2 -$42.1
I
Outyear savings are projected to grow by the CPI-U for the BaltimoreiW ashington 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 of Finance; and Wesley Girling, Office of Human Resources.
lFB:lob
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 of Investment Trustees
Wesley Girling, Office of Human Resources
David Platt, Department of Finance
Michael Coveyou, Department of Finance
John Cuff, Office of Management and Budget
@