PS/GO Item 1
May 9, 2012
Worksession
PLEASE BRING YOUR PACKET FROM MAY 8 PUBLIC HEARING
MEMORANDUM
May 8, 2012
TO:
FROM:
SUBJECT:
Public Safety/Government Operations and Fiscal Policy Committees
Robert
H.
Drwnmer, Senior Legislative
Attomey~
Worksession:
Expedited Bill 18-12, Personnel - Disability Retirement­
Eligibility and Benefits - Amendments
Expedited Bill 18-12, Personnel
Disability Retirement - Eligibility and Benefits ­
Amendments, sponsored by the Council President at the request of the County Executive, was
introduced on May 1,2012. A public hearing was held on May 8.
Bill 18-12 would:
• Create a catastrophic incapacity service-connected disability retirement benefit
for members of Retirement Group F (Police) and employees represented by
MCGEO;
• Modify the amount of the benefit for a partial and total incapacity service­
connected disability retirement for members of Retirement Group F (Police) and
employees represented by MCGEO; and
• Reduce the restrictions on receiving a service-connected disability retirement
benefit for members of Retirement Group F (Police) and employees represented
by MCGEO who are convicted of a crime.
Council Options
The Executive transmitted Bill 18-12 to the Council on April 23 to implement the
arbitrator's decision pursuant to the uncodified section of Bill 45-10.
The
Bill
is not the result
of a negotiated Agreement.
The Executive, in his transmittal memo, expressly reserved his
legislative authority over the Bill under the County Charter. Since this arbitration was outside of
the normal collective bargaining process required by the County collective bargaining laws, the
Council does not need to indicate its intent to reject or approve this legislation by May 15. The
Council can consider Bill 18-12 in the same manner as other legislation proposed by the
Executive.
The Council can enact it, reject it, amend it, or not vote on it.
Bill
18-12, if
enacted, would amend the provisions of Bill 45-10 enacted last July.
If
Bill 18-12 is not
enacted, the provisions of
Bill
45-10 would take effect on July 1,2012.
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Public Hearing
Joan Fidler, President of the Maryland Taxpayers League (©42) and Brian McTighe, an
attorney specializing in employee benefits (©45-46) opposed the Bill
as
an expensive repeal of
the reforms enacted in Bill 45-10 last year. Marc Zifcak, President of the Fraternal Order of
Police Lodge 35 (©43-44) supported the Bill as reasonable concession made by the FOP during
collective bargaining that is less expensive than the current one-tier disability retirement system.
Former Councilmember Duchy Trachtenberg (©47-48) also sent an email message opposing the
Bill.
Council Staff Recommendations
1.
Should the Council increase the minimum amount of a service-connected disability
pension to
60%
of final salary?
Council staff could not find a local multi-tier disability retirement system with a partial
disability pension as high as 60%. Howard and Baltimore Counties are at 50%. Prince George's
County is at 55%. The District of Columbia is a different type of system, but a partial disability
pension could be
as
low at 40% of final pay. Anne Arundel County does not have a multi-tier
system. Fairfax County takes a different approach - the disability pension is at 66%%, but drops
for everyone to 60% at normal retirement age. The 52\;2% of final pay in Bill 45-10 is within the
range of most competing jurisdictions. Increasing the partial incapacity minimum to 60% would
increase the County's annual contribution by more than $800,000.
It
would divert the County's
scarce resources to pay for a tax-free disability retirement benefit that would pay an employee
more than the income reasonably lost due to injury.
Council staff recommendation: do not raise the partial incapacity to 60%.
2. Should the Council create a catastrophic incapacity category at
90%
of final pay?
A tax-free total incapacity pension equal to 70% of final pay would replace all of the
employee's lost salary. A tax-free catastrophic incapacity pension equal to 90% of final pay
would replace more than the employee's normal salary. Therefore, the only reason to provide a
catastrophic incapacity pension greater than 70% is to pay an employee an extra benefit greater
than the income lost due to the reason the employee is unable to work at any job.
Replacing lost
income rarely serves as full and fair compensation for the pain and suffering experienced by an
employee who suffirs a service-connected injury that results in total or catastrophic incapacity.
A 90% catastrophic incapacity category is an attempt to compensate the employee for this pain
and suffering in addition to replacing lost income. This is a dangerous road to start down. The
potential cost to provide full and fair compensation for all losses due to a catastrophic injury is
enormous if the category and the enhanced benefit each grow over time.
It
can quickly become
unsustainable.
Council staff recommendation: do not create a catastrophic incapacity category at 90%
of final pay.
2
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3. Is the definition of catastrophic incapacity reasonable?
If the Council decides to create a catastrophic incapacity category, the definition is too
broad. Most, but not all of the definition, was copied from the definition of permanent and total
disability under the Maryland Worker's Compensation Law.
However, the Worker's
Compensation Law has a different purpose than the disability retirement system. Worker's
compensation is a legislative compromise that authorizes a payment to an injured worker without
requiring the worker to prove that the injury was due to the negligence of an employer or a co­
worker. In return for the expanded pool of recipients, each injured worker is strictly limited by
statute to the amount of the compensation awarded for pain and suffering. However, worker's
compensation is designed to compensate an injured worker for pain and suffering in addition to
lost income and medical expenses. Therefore, an enhanced benefit for an amputation or
paralysis is logical. It does not fit in a system designed to only replace lost income.
Functional deafness is not listed in the Worker's Compensation Law used as a model for
the catastrophic incapacity definition for a good reason. A worker who suffers an injury causing
functional deafness is normally able to perform some type of work.
It
does not belong.
Council staff recommendation: if the Council wants to create a catastrophic incapacity
category, we recommend dropping functional deafness and using the definition of
dismemberment or paralysis
in the Baltimore County law shown at ©59 of the public hearing
packet. We would also recommend reducing the minimum award to 75% of final pay as is done
in Baltimore County.
4. Should the Council amend the provISIon that prohibits a person from receiving a
service-connected disability retirement pension who commits an offense that would justify
termination for misconduct?
Bill 45-10 prohibits an award of a service-connected disability retirement pension to an
employee who has "committed an offense that would justify termination for misconduct." The
arbitrator noted that neither party could adequately explain the policy behind this provision. This
confusion may be due to the arbitrator's misconception of the purpose of the disability retirement
system.
It
is an enhanced retirement benefit to replace the income the employee is going to lose
because of a service-connected disabling injury or illness. If an employee has committed an
offense that would justity termination for misconduct, then that employee was not going to
continue to work in his or her current position even if the employee did not become disabled.
Therefore, the employee lost no income due to disability.
I
The employee may still be eligible for
a normal or early retirement pension because that is based upon years of service.
Bill 18-12 would turn this provision on its head by authorizing the County to stop paying
a service-connected disability retirement pension for those months that employee is incarcerated.
This provision was taken from a "bad boy" provision in the Social Security regulations requiring
the nonpayment of benefits to prisoners? This is a punitive provision that has nothing to do with
lost income due to disability.
It
would apply to current and future disability retirees and is not
The Inspector General found several cases where a police officer applied for and received disability retirement
immediately after pleading guilty to a felony.
2
See,
hlU22E~Y.!y'~Y.:.§'Q.dill~S:.C..ill.iJy':gQ
v/0 P
l-1.91.m;Li;..f!:;...QL'f.Q41404:_Q3:.!Llthl
m .
I
3
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related to misconduct on the job. If the Council decides to enact this provision, the County
Attorney's Office opined that it cannot be retroactively applied to current retirees and
recommended that the this provision apply only to a retiree who applies for disability retirement
on or after the effective date of the Act. See ©40-41.
Council staff recommendation:
do not amend the provision established in Bill 45-10.
Overall Recommendation
Bill 18-12 does not improve any of the provisions of Bill 45-10. Bill 18-12 is costly, out
of step with other competing local jurisdictions, and in many areas illogical. The best argument
for enacting Bill 18-12 is that it resulted out of a collective bargaining process. However, it is
not the result of an agreement between the Executive and a County employee union.
It
is the
result of a decision by one private arbitrator.
Council staff recommendation:
do not enact Bill
18-12.
This packet contains:
Expedited Bill 18-12
Legislative Request Report
Transmittal Memo from County Executive
Memo from Executive concerning MCGEO
Fiscal Impact Statement
April 4 Mercer Letter
April 9 Mercer Letter
Bill 45-1 0 excerpt
May 3 County Attorney Opinion
Testimony
Joan Fidler
Marc Zifcak
Brian McTighe
Duchy Trachtenberg
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Circle #
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40
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43
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47
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Expedited Bill No......
: . -. . :. 1=.2_
_
--=_~_
18:
Concerning: Personnel
Disability
Retirement - Eligibility and Benefits­
Amendments
Revised: April
27, 2012
Draft No. _3_
Introduced:
May
1, 2012
Expires:
November 1,
2013
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: _ _ _ _ _ _ _ __
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)
create a catastrophic incapacity service-connected disability retirement benefit for
certain employees;
(2)
modifY the amount of the benefit for a partial and total incapacity service-connected
disability retirement for certain employees;
(3)
reduce the restrictions on receiving a service-connected disability retirement benefit
for certain employees who are convicted of a crime; and
(4)
generally amend County law regarding disability retirement.
By amending
Montgomery County Code
Chapter 33, Personnel and Human Resources
Sections 33-43
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.
18-12
Sec
1.
Section 33-43 is amended as follows:
2
3
4
5
6
7
8
9
10
33-43.
Disability retirement.
*
(b)
following meanings:
*
*
Definitions.
In this Section, the following words and phrases have the
*
*
*
Catastrophic Incapacity
means
£!
member's inability to engage in any
substantial gainful activity because of
£!
permanent loss or loss of use of:
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
ill
ill
ill
ill
ill
®
ill
both arms;
both eyes;
both feet;
both hands;
both legs;
functional deafness; or
£!
combination of any two of the following body parts:
®
arm;
eye;
an
aD
(g
foot;
(Q}
hand; or
~
*
*
*
Correctional facility
means
£!
jail, prison, or other penal institution
under the control and jurisdiction of the agency in charge of the penal
system or in which convicted criminals can be incarcerated.
*
*
*
Felony
means an offense that is classified as
£!
felony under applicable
law
or~
in
£!
jurisdiction which does not classify any crime as
£!
felony, is
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EXPEDITED
BILL
No.
18-12
28
29
30
an offense punishable
Qy
death or
Qy
imprisonment for
~
tenn exceeding
one year.
*
that
~
*
*
~
31
32
33
34
Vocational rehabilitation program
means
court-approved program
prisoner is actively and satisfactorily participating in and is
expected to result in the prisoner being able to do substantial gainful
activity upon release and within
~
reasonable time.
35
36
*
(t)
*
*
Service-connected disability retirement.
37
38
39
40
41
42
43
(1)
A member may be retired on· a service-connected disability
retirement if:
(A)
the member
IS
catastrophically, totally, or partially
incapacitated as the natural and proximate result of an
accident occurring, or an occupational disease incurred or
condition aggravated, while in the actual perfonnance of
duty;
44
45
46
*
(E)
*
*
the member:! except
~
member of Group
L
E or
a
has not
committed an offense that would justity termination for
misconduct. A member of Group
L
.E..,.
or H must not be
paid
~
47
48
49
monthly benefit for any month on or after July
L
2012 if the member is confined in
~
correctional facility for
conviction of
~
felony during any part of that month unless
the member is participating in
program. Confinement in
~
~
50
51
vocational rehabilitation
52
correctional facility continues
under
~
53
54
as long as the individual
sentence of
confinement and has not been released due to parole or
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ExPEDITED
Bill No. 18-12
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
(ID
pardon.
An
individual is considered confined even if he or
she is temporarily or intermittently outside of the facility
on work release, attending school, hospitalized, or similar
program.
*
(i)
*
*
Amount ofpension at service-connected disability retirement.
(I)
Catastrophic Incapacity.
The County must
lli!Y
~
Group
~ ~
or
H member who retires on
~
service-connected disability
retirement with catastrophic incapacity an annual penSIOn
calculated under Section 33-42Cb)(1), except that:
(A) the County must substitute final earnings for average final
earnings; and
the pension must be at least 90% of the member's final
earnmgs.
[(1)]
ill
Total incapacity.
The County must pay a member who retires
on service-connected disability retirement with total incapacity an
annual pension calculated under Section 33-42(b)(1), except that:
(A) the County must substitute final earnings for average final
earnings; and
(B) the pension must be at least 70% of the member's final
earnings.1 except for
~
Group
~
or H member.
The
pension must be at least 6673 % of the member's fmal
earnings for
~
Group
~ ~
or H member.
[(2)]
ill
If the
benefit calculation under Section 33-42(b)(1) is greater
than any other benefit under this subsection, the County must pay
a Group G member who retires on a service-connected disability
aBILLS\1218
Disability Retirement-Eligibility And Benefits\BiIl3.Qoc
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EXPEDITED BILL No. 18-12
82
83
between June 26, 2002, and June 30, 2007, a pension based on
the member's average final earnings if that member's average
final earnings result in a greater benefit than final earnings.
[(3)]
84
85
86
87
88
89
90
91
ill
The Disability Review Panel must recommend a finding of
~
catastrophic incapacity or total incapacity for
member or total incapacity for
~
Group
L
~
or H
member of any other Group if
the member's service-connected disability is severe enough to
meet the Social Security Administration's requirements for
disability, meaning that the member is unable to engage in any
substantial gainful activity because of a medically determinable
physical or mental impairment that can be expected to end in
death or has lasted, or can be expected to last, for a continuous
period of at least 12 months. The member does not have to
qualifY for Social Security disability benefits to be eligible for
benefits under this subsection.
92
93
94
95
96
97
98
99
*
*
*
(D) If a member has already been granted disability benefits by
the Social Security Administration when the member
applies for a service-connected disability pension, the
County must pay the member a pension of at least 66o/J
%
for
~
100
101
102
103
104
105
106
107
108
Group
L
E or H member or 70% for
~
member of
any other Group if the Disability Review Panel finds that
the award of disability benefits from the Social Security
Administration was based primarily on the same medically
determinable physical or mental impairment on which the
Disability Review Panel awards the member a service­
connected disability benefit.
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EXPEDITED BILL
No. 18-12
109
110
[(4)]
ill
The County must pay a member who retires with partial
incapacity on a service-connected disability retirement an annual
pension calculated under Section 33-42(b)(1), but the benefit
must be at least 60 % of [mal earnings for
~
111
112
Group
~
L 11
or
H
113
114
115
member or at least
52Y2
% of final earnings for
member of any
other Group, if the Chief Administrative Officer finds, based on a
recommendation from the Disability Review Panel, that:
(A)
the member meets the standards to receive a servlce­
connected disability benefit under subsection
(0;
and
(B)
the member is not eligible to receive a benefit for
catastrophic or total incapacity under subsection [(i)(3)]
illQ}
or subsection
(i)(l).
116
117
118
119
120
121
122
123
124
125
[(5)]
@
(A) The County must increase the partial incapacity service
connected disability pension benefit of a member calculated
under Section 33-42(b)(1), from a benefit of at least
[52Y2]
60 %
to a benefit of at least 66¥J % for
~
Group
L 11
or H member or
~
from at least 52Y2 to at least 70% for
Group, if:
member of any other
126
127
128
*
[(6)]
ill
*
*
*
*
129
*
[(7)]
l30
l31
132
l33
l34
l35
ill
The County must pay a Group F member who retires on a
service-connected disability retirement on or after June 26, 2002,
an annual pension calculated under subsection (i)(1), [or]
subsection (i)(2), or subsection [0)(4)]
illill.
However, if a
greater benefit results from the calculation under Section 33
42(b)(1), the County must pay a Group F member a pension
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EXPEDITED BILL
No.
18-12
136
137
based on the member's average final earnings if that member's
average final earnings result in a greater benefit than final
earnmgs.
138
139
*
33-128. Definitions.
*
*
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
In
this Division, the following words and phrases have the following
meamngs:
*
*
*
Catastrophic Incapacity
means
!!
member's inability to engage in any
substantial gainful activity because of
!!
permanent loss or loss of use of:
ill
ill
ill
ill
ill
@
both arms;
both eyes;
both feet;
both hands;
both legs;
functional deafness; or
!!
combination of any two of the following body parts:
ill
®
arm;
@)
eye;
{Q}
foot;
(ill
hand; or
tID
~
*
*
*
Correctional facility
means
!!
jail, prison, or other penal institution
under the control and jurisdiction of the agency in charge of the penal
system or in which convicted criminals can be incarcerated.
*
*
*
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EXPEDITED BILL
No. 18-12
163
164
165
166
167
168
169
170
171
172
Felony
means an offense that is classified as
!'!
felony under applicable
law
QL.
in
!'!
jurisdiction which does not classifY any crime as
!'!
felony, is
an offense punishable
Qy
death or
Qy
imprisonment for!,! term exceeding
one year.
*
*
*
Represented employee
means an employee who occupies
!'!
position in
!'!
bargaining unit represented
Qy
an employee organization certified under
Section 33-106.
*
*
*
Vocational rehabilitation program
means
!'!
court-approved program
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
that
!'!
prisoner is actively and satisfactorily participating in and is
expected to result in the prisoner being able to do substantial gainful
activity upon release and within
!'!
reasonable time.
33-129. Disability benefits.
*
(d)
*
*
Initial service-connected disability benefits.
An
employee may receive
disability benefits for a period of 36 consecutive months, subject to this
plan, if the administrator finds that:
*
(E)
An
employee~
*
*
except
!'!
represented employee, who has
committed an offense that would justify termination for
misconduct must not receive service-connected disability
benefits.
A represented employee must not be paid
!'!
monthly benefit for any month on or after July
L
2012
if
the represented employee is confined in
!'!
correctional
facility for conviction of
!'!
felony during any part of that
month unless the represented employee is participating in
!'!
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EXPEDITED BILL No.
18-12
190
191
192
193
194
195
196
197
198
199
vocational rehabilitation program.
Confinement in
f!:
correctional facility continues as long as the individual is
under
f!:
sentence of confinement and has not been released
due to parole or pardon.
An
individual is considered
confined even if he or she is temporarily or intermittently
outside of the facility on work release, attending school,
hospitalized, or similar program.
*
(f)
*
*
The Disability Review Panel must recommend a finding of
catastrophic incapacity or total incapacity for
£!
represented employee,
or total incapacity for any other employee, if the member's service­
connected disability is severe enough to meet the Social Security
Administration's requirements for disability, meaning that the member
is unable to engage in any substantial gainful activity because of a
medically determinable physical or mental impairment that can be
expected to end in death or has lasted, or can be expected to last, for a
continuous period of at least 12 months. The member does not have
to qualify for Social Security disability benefits to be eligible for
benefits under this subsection.
(1)
The Panel must base its determination of whether an individual
is able to engage in any substantial gainful activity on an
assessment from an independent vocational expert that
considers the member's age, education, work experIence,
transferable skills, and residual functional capacity.
(2)
The Panel must determine the member's residual functional
capacity and provide this information to the independent
vocational expert.
GW\BILLS\1218
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201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
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EXPEDITED BILL No.
18-12
217
218
219
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221
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223
224
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227
228
229
230
231
232
233
234
235
236
237
238
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242
243
(3)
A Panel determination that the member's service-connected
disability is severe enough to be considered a disability by the
Social Security Administration is not a recommendation that
the member is entitled to, or should be granted, a disability
benefit by the Social Security Administration.
(4)
If a member has already been granted disability benefits by the
Social Security Administration when the member applies for a
service-connected disability pension, the County must give the
member a total incapacity benefit if the Disability Review Panel
finds that the award of disability benefits from the Social
Security Administration was based primarily on the same
medically determinable physical or mental impairment on
which the Disability Review Panel awards the member a
service-connected disability benefit.
(g)
The Disability Review Panel must recommend a finding of partif.ll
incapacity if:
(1)
the member meets the standards to receive a service-connected
disability benefit; and
(2)
the member is not eligible to receive a benefit for catastrophic
or total incapacity under subsection
(t).
*
33-131. Amount of benefits.
*
*
(a)
Service-connected disability.
ill
Catastrophic Incapacity.
The County must
~ ~
represented
employee who retires on
~
service-connected disability retirement
with catastrophic incapacity an annual pension equal to
900/0
of
the represented employee's final earnings, less any reductions
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EXPEDITED BILL
No. 18-12
244
245
246
247
248
249
250
251
252
253
254
255
256
257
258
259
260
261
262
263
264
265
266
267
268
provided in Section 33-134.
ill
Total Incapacity.
The annual amount of service-connected
disability payments payable to an employee, except
~
represented
employee, for total incapacity equals 70% of the employee's final
earnings, less any reductions provided in section 33-134. The
County must
~ ~
represented employee who retires on
~
service-connected disability retirement with total incapacity an
annual pension equal to 66%% of the represented employee's
final earnings, less any reductions provided in Section 33-134.
ill
Partial Incapacity.
The annual amount of service-connected
disability payments payable to an employee, except
~
represented
employee, for partial incapacity equals
52Y2
%
of the employee's
final earnings. The County must
who retires on
~
~ ~
represented employee
service-connected disability retirement with
partial incapacity an annual pension equal to 60% of the
represented employee's final earnings.
*
Sec.
2.
Expedited Effective Date.
*
*
The Council declares that this Act is necessary for the immediate protection of
the public interest. The amendments to Chapter 33 made by Section 1 of this Act
amend the provisions of Chapter 33 as amended by 2011 Laws of Montgomery
County, Ch. 13, and take effect on July 1, 2012. The amendments to County Code
Chapter 33 made by Section 1 of this Act apply to a service-connected disability
retirement that arises out of a disabling accident, injury, or occupational disease
which occurs on or after July 1, 2012.
~BILLS\1218
Disability Retirement-Eligibility And Bcnefits\BiIl 3.Doc
o
.
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LEGISLA TIVE REQUEST REPORT
Expedited Bill 18-12
Personnel
-
Disability Retirement
-
Eligibility and Benefits
-
Amendments
DESCRIPTION:
This Bill amends Chapter 33 to implement the March 29, 2012, Service­
Connected Disability Retirement Interest Arbitration award, as provided
for in Bill 45-10.
Amend Chapter 33 to implement the March 29, 2012, Service-Connected
Disability Retirement Interest Arbitration award.
PROBLEM:
GOALS AND
OBJECTIVES:
Amend Chapter 33 to implement the March 29, 2012, Service-Connected
Disability Retirement Interest Arbitration award.
COORDINATION:
Office of the County Attorney and Police Department.
FISCAL IMPACT:
Office of Management and Budget.
ECONOMIC
IMPACT:
EVALUATION:
Office of Management and Budget.
Subject to the general oversight of the County Executive and the County
Council. The Office of the County Attorney will evaluate for fonn and
legality.
EXPERIENCE
ELSEWHERE:
Unknown
SOURCES OF
INFORMATION:
Silvia C. Kinch
Associate County Attorney
Office of the County Attorney
Joseph Adler
Director
Office of Human Resources
APPLICATION
WITHIN
MUNICIPALITIES:
None.
PENALTIES:
Not applicable.
F:\LAW\BILLS\1218 Disability Retirement·Eligibility And Benefits\LRR,Doc
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OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLE, MARYLAND 20850
Isiah Leggett
County Executive
MEMORANDUM
April 18,2012
TO:
Roger Berliner, President
Montgomery County Council
Isiab. Leggett, County Executive
Legislation to Implement the March 29, 2012, Service-Connected
Disability Retirement Interest Arbitration Award as Provided in Bill 45-1 0
FROM:
SUBJECT:
As provided in Bill 45-10, attached please find legislation that would
implement the March 29, 2012, Service-Connected Disability Retirement Interest
Arbitration Award. Council staff was provided with a copy of the Arbitrator's decision
on March 29, 2012. As you know, the Arbitrator selected the Fraternal Order of Police,
Lodge 35's Last Best Final Offer. By transmitting this legislation I am not foregoing any
legislative authority I may have under the County Charter.
As part ofBi1l45-10, enacted June 28, 2011, and effective July 1,2012,
the County Council amended Chapter 33 of the County Code as it relates to service­
connected disability retirement, but authorized separate negotiations with the certified
employee representative for the police bargaining unit and the certified representative for
the OPT and SLT bargaining units. The Fraternal Order of Police, Lodge 35, engaged in
bargaining, negotiations and arbitration. The Municipal and County Government
Employee's Association, UFCW Local 1994 also participated in bargaining, but chose
not to actively participate in arbitration and instead to simply adopt the Arbitrator's
award. The parties were unable to reach agreement and the matter proceeded to
arbitration on March 22, 2012. The Arbitrator selected the Fraternal Order of Police,
Lodge 35's Last Best Final Offer. In accordance with Section 4(d) of Bill 45-1 0, the
Arbitrator's award was submitted to Council on March 29, 2012. The proposed
expedited legislation incorporates the Arbitrator's award.
Attachments:
A.
Expedited Legislation
B.
Legislative Request Report
C.
Fiscal Impact Statement
@
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OFFICE OF THE COUNTY EXECUTIVE
ROC/(VILLE. MARYLAND 20850
Islah Leggett
County Executive
MEMORANDUM
April 26, 2012
TO:
Roger Berliner, President
Montgomery County Council
Isiah Leggett
County Executive
FROM:
~
SUBJECT:
MCGEO's Inclusion in Service-Connected Disability Retirement Arbitration
Award
As I mentioned in my prior memorandum to you dated April 18, 2012, the
Municipal County Government Employee's Organization, UFCW Local 1994 ("MCGEO"), and
the Fraternal Order of Police, Lodge
35
("FOP") participated in bargaining with my
representative over service-connected disability retirement as required by Section 4 of Bill
45-10, which was enacted by Council on July 11, 2011. MCGEO and the County agreed that,
although MCGEO would not actively participate in the subsequent arbitration, it would be a
party to that arbitration and any award would apply to MCGEO just
as
it applied to the FOP.
Arbitration occurred on March 22,2012, between the FOP and the County, with a representative
from MCGEO present during the hearing. As you are aware, the Arbitrator selected FOP's Last
Best Final Offer. That award also applies to MCGEO. In accordance with Section 4(d) of Bill
45-10, the Arbitrator's award was submitted to Council on March 29, 2012, and the County
Executive transmitted proposed legislation to incorporate
the
Arbitrator's award on April
18,
2012.
IL:kb
montgomerycountymd.gov
1311
240-773-3556
nY
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ROCKVILLE, MARYLAND
MEMORANDUM
April 16, 2012
TO:
FROM:
SUBJECT:
Roger Berliner, President, County Council
Jennifer A. Hughes, Director, Office of Management and
Joseph F. Beach, Director, Department of Finance
BilJ xx-12 - Service Connected DisabiJity Retirement
Attached please find the fiscal and economic impact statements for legislation
that will implement the March 29, 2012 arbitration award regarding service-connected disability
retirement for members ofthe police bargaining unit.
c: Kathleen Boucher, Assistant Chief Administrative Officer
Lisa Austin, Offices ofthe County Executive
Joy Nurmi, Special Assistant to the County Executive
Patrick Lacefield, Director, Public Information Office
Joseph Adler, Director, Office ofHuman Resources
Alex Espinosa, Office of Management and Budget
Naeem Mia, Office of Management and Budget
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Fiscal Impact Statement
Bill, Service Connected Disability Retirement
I. Legislative Summary
As provided in Bil145-10, the subject legislation implements the Arbitrator's decision in
the March 29,2012 service-connected disability retirement arbitration award to the
Fraternal Order of Police (FOP), Lodge 35. County Council
staff
was provided with a
copy of the arbitration award on March 29. The bill establishes a multi-tiered disability
retirement system under certain criteria of either the greater of the accrued benefit or 60
percent, 66
2/3
percent, or 90 percent of final earnings, depending on the level ofthe
disability. Functional hearing loss is included as one of the conditions enabling a member
to be eligible for a disability retirement benefit of 90 percent offinal earnings. The
legislation covers employees in Groups A, E, F, and H of the Employees Retirement
System.
2.
An
estimate of changes in County revenues and expenditures regardless of whether the
revenues or expenditures are assumed in the recommended or approved budget. Includes
source ofinformation, assumptions, and methodologies used.
Mercer, the County's retirement plan actuary, estimates a minimum annual cost of
$852,000 relative to the proposed FYI3 budget to implement the arbitration award.
Mercer is unable to make an appropriate assumption regarding the increased incidence of
functional hearing loss that would entitle a member to a disability benefit of 90 percent of
final earnings, but did estimate that annual costs could increase by an additional $73,000
to $91,000 for each 1 percent of disablements who receive the 90 percent benefit.
According to Mercer, this 1 percent assumption does not represent a best estimate of the
impact; the actual impact could be much higher, lower> or even negligible. The
attachments include more detailed cost estimates by plan and actuarial assumptions.
3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
The minimum cost over six years is $5.112 million. There could be an additional six-year
cost between $438,000 and $546,000 for each additional 1 percent of disablements who
receive the 90 percent benefit level.
4.
An
actuarial analysis through the entire amortization period for each bill that would affect
retiree pension or group insurance costs.
See attached actuarial analysis.
5. Later actions that may affect future revenue and expenditures ifthe bill authorizes future
spending.
Not applicable.
1
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6. An estimate of the staff time needed to implement the bill.
The bill does not affect the amount of staff time engaged in the disability retirement
administration system.
7.
An explanation of how the addition of new staff'responsibilities would affect other duties.
Not applicable.
8. An estimate of costs when an additional appropriation is needed.
An additional appropriation of at least $852,000 relative to the FY13 proposed budget
is
needed to implement the bilL
9.
A description of any variable that could affect revenue and cost estimates.
See attached actuarial analysis.
10. Ranges of revenue or expenditures that are uncertain or difficult to project.
See
#2
and
#3
above.
11. If a bill is likely to have no fisca1 impact, why that is the case.
Not applicable.
12.
Other fiscal impacts or comments.
None.
13. The following contributed
to
and concurred with
this
analysis:
Joseph Adler, Director, Office of Hurnan Resources
ALex Espinosa, PSP Manager, Office of Management and Budget
O,ennift
A.
Hughes,
DiT
tor
Office of Management and Budget
2
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Economic Impact Statement
Council Bill
XX~12
(amendment to Bi1l45-10)
-Service Connected Disability Retirement
Background:
As provided in Bill 45-10, the subject legislation implements the Arbitrator's decision in
the March 29,2012 service-connected disability retirement arbitration award to the
Fraternal Order of Police (FOP), Lodge 35. County Council staff was provided with a
copy of the arbitration award on March 29. The bill establishes a multi-tiered disability
retirement system under certain criteria of either the greater of the accIUed benefit or 60
percent, 66
2/3
percent, or 90 percent of final earnings, depending
011
the level of the
disability. Functional hearing loss is included as one of the conditions enabling a member
to be eligible for a disability retirement benefit of 90 percent of final earnings. The
legislation covers employees in Groups A, E, F, and H of the Employees Retirement
System.
1.
The sources of information, assumptions, and methodologies used.
The Department of Finance relied on the analysis performed by Mercer, the retirement
plan's actuary. Mercer indicated the minimum annual cost of this legislation (to
implement the arbitration award at $852,000 and a minimum cost over six years of·
$5.112 million. There could be an additional six-year cost between $438,000 and
$546,000 for each additional I percent of disablements who receive the 90 percent
benefit level.
2. A description of any variable that could affect the economic impact estimates.
Not applicable. See #3 below.
3. The Bill's positive or negative effect, if any on employment, spending, saving,
investment, incomes, and property values in the County.
The annual expenditure impact of the proposed legislation is not significant enough to
cause a quantifiable impact on the County's employment, spending, saving, or other
relevant economic indicators.
4.
If
a Bil1 is likely to have no economic impact, why is that the case?
See #3 above.
5. The following contributed to and concurred with this analysis: David Platt and Mike
Coveyou, Finance.
~~eacb,
Director
Department of Finance
~l~
;1-/(-/"2­
Date
@
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Douglas Rowe, FSA, EA, MAAA
Principal
M
WiERCER
One South St., Suite 1001
Baltimore. IVIC
21202
4103472806 Fax4107273347
douglas.rowe@mercer.com
www.mercer.com
Via Electronic Mail
Mr. Joseph Adler
Director of Office of Human Resources
Montgomery County Government
101 Monroe Street, Seventh Floor
Rockville, MD 20850-2589
April 4, 2012
Subject:
Proposal on Disability Provisions for FOP -
Updated From Our March
21,
2012 Letter to
Reflect "Functional Hearing
Loss"
Provision
Dear Joe:
The purpose of this letter is to address the inclusion of "functional hearing loss" among the
"certain
criteria"
described later in this letter for which members would be eligible for a benefit equal to
90% of pay at disability. This letter only addresses the impact of this provision on the Montgomery
County Employees' Retirement System (ERS) and only for Group F.
As we discussed, we have no way of determining what would be an appropriate assumption for
the increased incidence of 90%
of
pay benefits with this new provision in the absence of further
information about how the provision would be administered. One explanation says "Functional
hearing loss involves a psychological or emotional problem, rather than physical damage to the
hearing pathway. Individuals with this type of hearing loss do not seem to hear or respond; yet, in
reality, they have normal hearing." We are not experts in hearing or disability administration or
determination, but this explanation seems to us to allow a broad range of possible outcomes for
employees to receive the proposed 90% benefit level.
As we agreed, to illustrate the cost impact of a 1% increase in the incidence of the 90% of pay
benefits and to provide a range of results, we have modified the results from our letter dated
March 21, 2012 to reflect two additional scenariOS, which increase the assumed rate of service­
connected disabilities that meet
"certain criteria"
by 1% and decrease the assumed rate of the
other service-related disabilities per the following scenarios:
• Scenario
1 - decreases the assumed rate of disabilities qualifying for the 66
2/3%
benefit by
1%. No changes to the assumed rate of disabilities qualifying for the 60% benefit
• Scenario 2 -
decreases the assumed rate of disabilities qualifying for the 60% benefit by
1
%.
No changes to the assumed rate of disabilities qualifying for the 66
2/3%
benefit
The changes reflected in this letter are based on our understanding of the set of proposed plan
changes you provided.
~
MARSH & McLENNAN
CONSULTING. OUTSOURCING. INVESTMENTS.
~
COMPANIES
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M
MERCER
Page 2
Apri14,2012
Mr. Joseph Adler
Montgomery County Government
The estimates are based on the July 1, 2011 actuarial valuation data. The data, actuarial
assumptions and methods, and plan provisions are the same as those used in our July 1, 2011
actuarial valuation report unless otherwise noted. Actual costs will depend on the actual
experience of the plan. By cost, we mean the change in Normal Cost and amortization payment
according to the County's policy. The benefit changes are assumed to apply only to active ERS
members, not to retirees or terminated vested members, with the exception
of
the retroactivity of
the 90% benefit level to July 1, 2004.
As
requested, we have estimated the impact of the plan changes on the FY2013 County
contributions. We have compared the impact against the budgeted FY2013 contributions provided
in the July 1, 2011 actuarial valuation report, which reflect the disability plan provisions effective
July 1, 2012. Reflecting the impact of these proposals in the FY2013 contribution would be a year
earlier than the most common recognition of past plan improvements by the County, which often
would have been reflected in the valuation following the change and funded in the fiscal year
beginning a year after the valuation date. However, reflecting this improvement at the same time,
i.e. in the FY2013 contribution, as the other disability changes seems appropriate.
Description of Proposed Plan Provision Changes
Following is the description of the proposed plan changes yc;>u provided.
The benefit amount for a group F member who applies for service-connected disability on or
after July 1,2012 and doesn't satisfy the
"cerlain criteria"
outlined below is:
For a disabled employee "determined not able to perform any substantial gainful
employment, as defined in Social Security's standards," but who would not satisfy the
"certain criteria"
outlined below: the greater of the accrued benefit or 66
2/3%
of final
earnings
For other disabilities that do not satisfy the
"certain criteria"
outlined below: the greater of
the accrued benefit or 60% of final earnings
The benefit amount for a group F member who applies for service-connected disability on or
after July 1, 2004 and retires on a service-connected disability retirement is:
For disability meeting
certain criteria
(para or quadriplegia, loss of limb, functional hearing
loss, etc. as specified in the Final Offer of Fraternal Order of Police, Montgomery County
Lodge 35, dated March 21, 2012): the greater of the accrued benefit or 90% of final
earnings
. . MARSH
&
MclENNAN
II!IIf"""JiI
COMPANIE 5
@.
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M
MERCER
Page 3
April 4, 2012
Mr. Joseph Adler
Montgomery
County
Government
• The non-service-connected disability retirement benefit amount and other plan provisions
would remain the same as described in the July 1, 2011 actuarial valuation report.
Actuarial Assumptions
Except as noted below, all the assumptions used in this analysis are the same as those used in
the July 1, 2011 valuation.
Assumptions for Service-connected disability
March 21, 2012 estimates
Scenario 1
Scenario 2
Receiving 60% benefit
Receiving 66
2/3%
benefit
Receiving 90% benefit
Receiving 90% benefit
Total
65.0%
26.2%
1.8%
1.8%
93.0%
65.0%
25.2%
2.8%
2.8%
93.0%
64.0%
26.2%
2.8%
2.8%
93.0%
• We understand that there is one current disabled retiree who would qualify for the 90%
minimum benefit. As discussed over the phone with the County, the retiree was receiving
$3,877 .16 per month at retirement in 2007 and is currently age 46. Based on the 2007
valuation data, that member has been included in the contribution impact for union members
shown below. Please note that we did not receive information for any current retirees that
would be eligible for the "functional hearing loss" benefit as a result of the plan change. If there
are any, it could increase the cost impact substantially and a revision to this letter may be
required. Please let us know if you're aware of any.
• We assumed that the Social Security standard for suspending benefits during incarceration
would not result in any reduction in contributions until after such suspensions occurred. We did
not attempt to quantify the impact on any future contributions due to this provision.
• All other assumptions are the same as those under the Union's LBFO as described in our
March 21, 2012 letter.
Contribution Impact
The estimated contribution impact of this proposal based on the results from the 2011 valuation
and budgeted FY2013 contribution is shown below.
~
MARSH
&
McLENNAN
~COMPANIES
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M
IVIERCER
Page 4
April
4, 2012
Mr. Joseph Adler
Montgomery County Government
The amounts shown below are rounded to the nearest thousand.
Scenario 1:
IncreaseJ(Decrease)
in
Union
Non-union
Total
Accrued Liability
Normal
Cost
FY2013 Contribution
$5,566,000
$277,000
$652,000
$87,000
$3,000
$9,000
$5,653,000
$281,000
$661,000
*Numbers may not add due to rounding.
Since the FY2013 contribution was estimated to increase $614,000 in the March 21, 2012 letter,
each 1
%
of disablements who receive the 90% benefit instead of the 66
2/3%
benefit increases
the County's contribution by
$47.000
($661,000
-
$614,OOO).
Scenario 2:
IncreaseJ(Decrease)
in
Union
Non-union
Total
Accrued Liability
Normal
Cost
FY2013
Contribution
$5,657,000
$282,000
$663,000
$90,000
$3,000
$9,000
$5,747,000
$286,000·
$672,000
*Numbers may not add due to rounding.
Since the FY2013 contribution was estimated to increase $614,000 in the March 21, 2012 letter,
each 1% of disablements who receive the 90% benefit instead of the 60% benefit increases the
County's contribution by $58,000
($672,000
-
$614,000).
Note that the portion of the contribution due to the change in Actuarial Accrued Liability is
amortized as a level percentage of assumed payroll over 20 years.
Please also note that the results shown above reflect the impact on the FY2013 contribution. If
these changes were adopted, they may first be reflected in the 2012 actuarial valuation report and
FY2014 budgeted contribution, or even later (depending on when the changes are adopted and
when the County decides to reflect them).
Add
itional Considerations
With the changes to disability benefits for certain service-connected disablements, it is possible
that the frequency of disability claims could change. This could change the impact on County
contribution amounts shown in this letter.
. . MARSH
&
MclENNAN
~,.
COMPANIES
@
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M
MERCER
PageS
Apri14,2012
Mr. Joseph AdJer
Montgomery County Government
Additionally, in the short term, the more generous COLAs available for service retirement benefits
for service prior to June 30, 2011, as opposed to disability retirements after June 30, 2011
t
could
result in a decrease to the number of disability claims in the near future.
We did not attempt to quantify the impact of either of the above.
Impacts on any amounts reflecting the most recent GASa 27 exposure draft have not been
incorporated into the results in this letter. This would require additional calculations beyond the
scope of this letter.
Important Notices
Mercer has prepared this letter exclusively for Montgomery County; Mercer is not responsible for
reliance upon this letter by any other party. Subject to this limitation, Montgomery County may
direct that this letter be provided to its auditors.
The only purpose of this letter is to provide analyses of the specified changes on annual
contribution amounts in order to help the County with collective bargaining. This letter may not be
used for any other purpose; Mercer is not responsible for the consequences
of
any unauthorized
use.
Decisions about benefit changes, granting new benefits, investment policy, funding policy, benefit
security
andlor
benefitMrelated issues should not be made on the basis of this letter, but only after
careful consideration of alternative economic, financial, demographic and societal factors,
including financial scenarios that assume future sustained investment losses.
This letter only represents a snapshot of a Plan's estimated financial condition at a particular point
in time; it does not predict the Plan's future financial condition or its ability to pay benefits in the
future and does not provide any guarantee of future financial soundness of the Plan. Over time, a
plan's total cost will depend on a number of factors, including the amount of benefits the plan
pays, the number of people paid benefits, the period of time over which benefits are paid, plan
expenses and the amount earned on any assets invested to pay benefits. These amounts and
other variables are uncertain and unknowable at the date of the analysis.
Because modeling all aspects of a situation is not possible or practical, we may use summary
information, estimates, or simplifications of calculations to facilitate the modeling of future events
in an efficient and cost-effective manner. We may also exclude factors or data that are immaterial
~
MARSH
&
MCLENNAN
.....,....,. COMPANIES
@
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M
MERCER
Page 6
April 4,2012
Mr. Joseph Adler
Montgomery County Govemment
in our judgment. Use of such simplifying techniques does not, in our judgment, affect the
reasonableness of analysis results for the plan.
To prepare this letter, actuarial assumptions, as described herein and in the July 1, 2011 actuarial
valuation report, are used in a forward looking financial and demographic model to select a single
scenario from a wide range of possibilities; the results based on that single scenario are included
in this letter. The future is uncertain and the plan's actual experience will differ from those
assumptions; these differences may be significant or material because these results are very
sensitive to the assumptions made and, in some cases, to the interaction between the
assumptions.
Different assumptions or scenarios within the range of possibilities may also be reasonable and
results based on those assumptions would be different. As a result of the uncertainty inherent in a
forward looking projection over a very long period of time, no one projection is uniquely "correct"
and many alternative projections of the future could also
be
regarded as reasonable. Two different
actuaries could, quite reasonably, arrive at different results based on the same data and different
views of the future. Due to the limited scope of Mercer's assignment, Mercer will not perform or
present an analysis of the potential range of future possibilities and scenarios when requested. At
the County's request, Mercer is available to determine the cost of a range of scenarios.
Actuarial assumptions may also be changed from one valuation to the next because of changes in
mandated requirements, plan experience, changes in expectations about the future and other
factors. A change in assumptions is not an indication that prior assumptions were unreasonable
when made.
The calculation of actuarial liabilities for valuation purposes is based on a current estimate of
future benefit payments. The calculation includes a compUtation of the "present value" of those
estimated future benefit payments using an assumed discount rate; the higher the discount rate
assumption, the lower the estimated liability will be. For purposes of estimating the liabilities
(future and accrued) in this letter, the County selected an assumption based on the expected long
term rate of return on plan investments. Using a lower discount rate assumption, such as a rate
based on long-term bond yields, could· substantially increase the estimated present value of future
and accrued liabilities, thus increasing the savings estimated in this letter, but also increasing the
cost of the remaining benefits.
Because analyses are a snapshot in time and are based on estimates and assumptions that are
not preCise and will differ from actual experience. contribution calculations are inherently
imprecise. There is no uniquely "correct" level of contributions for a particular plan year .
. . MARSH
&
McLENNAN
~~
COMPANIES
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M
MERCER
Page 7
April 4, 2012
Mr. Joseph Adler
Montgomery County Government
Valuations do not affect the ultimate cost of the Plan, only the timing of contributions into the Plan.
Plan funding occurs over time. Contributions not made this year, for whatever reason, including
errors, remain the responsibility of the Plan sponsor and can be made in later years. If the
contribution levels over a period of years are lower or higher than necessary,
it
is normal and
expected practice for adjustments to be made to future contribution levels to take account of this
with a view to funding the plan over time.
Data, computer coding, and mathematical errors are possible in the preparation of results
involving complex computer programming and thousands of calculations and data inputs. Errors in
a valuation discovered after its preparation may be corrected by amendment to this analysis letter.
Assumptions used are based on the last experience study. as adopted by the County and the
Board of Investment Trustees. lhe County is responsible for selecting the plan's funding policy,
actuarial valuation methods, asset valuation methods, and assumptions. The policies, methods
and assumptions used in this letter are those that have been so prescribed and are described
herein. The County is solely responsible for communicating to Mercer any changes required
thereto.
To prepare this letter Mercer has used and relied on financial data and participant data supplied
by the County and summarized herein. The County is responsible for ensuring that such
participant data provides an accurate description of all persons who are participants under the
terms of the plan or otherwise entitled to benefits as of July 1, 2011 that is sufficiently
comprehensive and accurate for the purposes of this report. Although Mercer has reviewed the
data in accordance with Actuarial Standards of Practice No. 23, Mercer has not verified or audited
any of the data or information provided.
Mercer has also used and relied on the plan documents, including amendments, and
interpretations of plan provisions, supplied by the County as summarized herein. We have
assumed for purposes of this letter that copies of any official plan document including all
amendments and collective bargaining agreements as well as any interpretations of any such
document have been provided to Mercer along with a written summary of any other substantive
commitments. The County is solely responsible for the validity, accuracy and comprehensiveness
of this information. If any data or plan provisions supplied are not accurate and complete, the
results may differ Significantly from the results that would be obtained with accurate and complete
information; this may require a later revision of this report. Moreover, plan documents may be
susceptible to different interpretations, each of which could be reasonable, and that the different
interpretations could lead to different results.
~
MARSH &McLENNAN
~
COMPANIES
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M
MERCER
PageS
April
4.
2012
Mr. Joseph Adler
Montgomery County Government
The County should notify Mercer promptly after receipt of this letter if the County disagrees with
anything contained in this report or is aware of any information that would affect the results
of
this
report that has not been communicated to Mercer or incorporated therein. This report will be
deemed final and acceptable to the County unless the County promptly provides such notice to
Mercer.
All costs, liabilities, and other factors under the plan were determined in accordance with generally
accepted actuarial principles and procedures. Funding calculations reflect the provisions of current
statutes and regulations issued hereunder. In our opinion, the actuarial assumptions are
reasonable and represent our best estimate
of
the anticipated experience under the plan.
Professional Qualifications
We are available to answer any questions on the material contained in the report, or to provide
explanations of further details as may be appropriate. The undersigned credentialed actuaries
meet the Qualification Standards of the American Academy of Actuaries to render the actuarial
opinion contained in this report. We are not aware of any direct or material indirect financial
interest or relationship, including investments or other services that could create a conflict-of­
interest, that would impair the objectivity of our work.
Sincerely,
Principal
~R~e.1::
EA
MAAA.
Copy:
Belinda Fulco, Montgomery County Govemment
The information contained in this document (including any attachments) is not intended by
Mercer to be used, and It cannot be used, for the purpose of avoiding penalties under the
Internal Revenue Code that may be imposed on the.taxpayer.
\\waswpfs01ldat.a3\dblclilmgewasl2012lspecial
stud'IBSlfop
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4 4 2012.doc
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MARSH
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Oouglas Rowe, FSA.. EA, MAAA
Principal
MMERCER
One South St, Suite 1001
Baltimore, MO
21202
4103472806 Fax4107273347
douglas.rowe@mercer.com
www.mercer.com
Via Electronic
Mail
Mr. Joseph Adler
Director of Office of Human Resources
Montgomery County Govemment
101
Monroe Street, Seventh Floor
Rockville, MD
20850-2589
April 9,
2012
Subject: Proposal on Disability Provisions for Groups A, E, and
H
Dear Joe:
The purpose
of
this letter is to provide the cost estimate you requested for the proposal to revise
the disability provisions for groups A, E. and H of the Montgomery County Employees' Retirement
System (ERS) to match the changes in the March
21, 2012
Union BAFO letter for group F. This
letter also addresses the potential inclusion of Ufunctional hearing loss" among the
"certain criteria"
described later in this letter for which group
A,
E. and H members would be eligible for a benefit
equal to
90%
of pay at disability.
The changes re'nected in this letter are based on our understanding of the set of proposed plan
changes you provided. As discussed, we did not reflect any retroactive benefits pertaining to the
90%
pay benefit level to July 1,
2004.
The estimate is based on the July
1, 2011
actuarial valuation data. The data, actuarial
assumptions and methods, and plan provisions are the same as those used in our July
1, 2011
actuarial valuation report unless otherwise noted. Actual costs will depend on the actual
experience of the plan. By cost, we mean the change in Normal Cost and amortization payment
according to the County's policy. The benefit changes are assumed to apply only to active ERS
members, not to retirees or terminated vested members.
As we discussed, we have no way of determining what would be an appropriate assumption for
the increased incidence of
90%
of pay benefits with the functional hearing loss provision in the
absence of further information about how the provision would be administered. One explanation
says "Functional hearing loss involves a psychological or emotional problem, rather than physical
damage to the hearing pathway. Individuals with this type of hearing loss do not seem to hear or
respond; yet, in reality, they have normal hearing." We are not experts in hearing or disability
administration or determination, but this explanation seems to us to allow a broad range of
possible outcomes for employees to receive the proposed
90%
benefit level.
~
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Page 2
April 9. 2012
Mr.
Joseph Adler
Montgomery County Government
Due to this uncertainty over the impact of adding functional hearing loss, we have illustrated the
cost impact of a 1% increase in the incidence of the 90% of pay benefits for groups A, E, and H by
including two addltionar scenarios ("Scenario 2 and Scenario 3
rt),
which increase the assumed rate
of service-connected disabilities that meet
"certain criteria"
by 1% and decrease the assumed rate
of the other service-related disabilities. The 1% assumption does not represent a best estimate of
the impact; the actual impact could be much higher, lower, or even negligible. A summary of the
assumed rates for each benefit is shown under the Actuarial Assumptions section below.
As requested, we have estimated the impact of
the
plan changes on the FY2013 County
contributions. We have compared the impact against the budgeted FY2013 contributions provided
in the July 1, 2011 actuarial valuation report, which reflect the disability plan provisions effective
July 1, 2012. Reflecting the impact of these proposals in the FY2013 contribution would be a year
earlier than the most common recognition of past plan improvements by the County, which often
would have been reflected in the valuation following the change and funded in the fiscal year
beginning a year after the valuation date. However, reflecting this Improvement at the same time,
Le. in the FY2013 contribution, as the other plan changes that are effective July 1,2012 seems
appropriate.
Description of Proposed Plan Provision Changes
Following is the description of the proposed plan changes you provided.
The benefit amount for group A, E, or H members who apply for service-connected disability
on or after July 1, 2012 and do not satisfy the
"certain criteria"
outlined below is:
For a disabled employee "determined not able to perform any substantial gainful
employment, as defined In Social Security's standards," but who would not satisfy the
n
"certain criteria
outlined below: the greater of the accrued benefit or 66
2/3%
of final
earnings
For other disabilities that do not satisfy the
"certain criteria"
outlined below: the greater of
the accrued benefit or 60% of frnal earnings
The benefit amount for group
A,
E, or H members who apply for service-connected disability
on or after July 1, 2004 and retire on a service-connected disability retirement is:
For disability meeting
certain criteria
(para or quadriplegia, loss of limb, functional hearing
loss, etc. as speCified in the Final Offer of Fraternal Order of Police, Montgomery County
Lodge 35, dated March 21, 2012): the greater of the accrued benefit or 90% of final
earnings
...... MARSH
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IVIERCER
Page 3
Apri19,2012
Mr. Joseph Adler
Montgomery County Government
• The non-service-connected disability retirement benefit amount and other plan provisions
would remain the same as described in the July 1, 2011 actuarial valuation report.
Actuarial Assumptions
Except as noted below, all the assumptions used in
t~is
analysis are the same as those used in
the July 1, 2011 valuation.
Groups
A and H
Assumptions for service-connected disability
Base Scenario
Scenario 2
Scenario 3
Receiving
60%
benefit
Receiving
66
213%
benefit
Receiving
90%
benefit
Total
service~connected
as
%
of all disabilities
20.0%
18.7%
1.3%
40.0% .
20.0%
17.7%
2.3%
40.0%
19.0%
18.7%
2.3%
40.0%
Group E
Assumptions for Serviee...connected disability
Base Scenario
Scenario 2
Scenario 3
Receiving
60%
benefit
Receiving 66
2/3%
benefit
Receiving
90%
benefrt
Total service-connected as
%
of all disabilities
60.0%
23.4%
1.6%
85.0%
60.0%
22.4%
2.6%
85.0%
59.0%
23.4%
2.6%
85.0%
• We assumed that the Social Security standard for suspending benefits during incarceration
would not result in any reduction in contributions until after such suspensions occurred. We did
not attempt to quantify the impact on any future contributions due to this prOVision.
• Please note that we did not receive information for any current retirees in Groups A, E, or H
who would qualify for the 90% minimum benefit. If there are any, it could increase the cost
impact substantially and a revision to this letter may be required. Please let us know jf you are
.
aware of any.
Contribution Impact
The estimated contribution impact of this proposal based on the results from the 2011 valuation
and budgeted FY2013 contribution is shown on the following pages. The amounts are rounded to
the nearest thousand. Please note numbers may not add due to rounding.
tif"I"1JI
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MERCER
Page 4
April9,2012
Mr. Joseph Adler
Montgomery County Government
Base Scenario
Group A
Increase/(Decrease} in
Union
Non-union
Total
Accrued Liability
Normal Cost
FY2013 Contribution
$0
$0
$0
$149,000
$6,000
$16,000
$149,000
$6,000
$16,000
Group E
Increase/(Decrease} in
Union
Non-union
Total
Accrued Liability
Normal Cost
FY2013 Contribution
$1,481,000
$88,000
$188.000
$120,000
$5,000
$13.000
$1,601,000
$93,000
$201,000
Group H
Increase/(Decrease) in
Union
Non·union
Total
Accrued Liability
Normal Cost
FY2013 Contribution
$200,000
$8,000
$21
$0
$0
$0
$200,000
$8,000
$21,000
All groups A, E, H
Increase/(Decrease) in
Union
Non-union
Total
$1,950,000
$107,000
$238,000
Accrued Liability
Normal Cost
FY2013 Contribution
$1,681,000
$96,000
$209,000
$269,000
$11,000
$29,000
~
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MERCER
PageS
April 9, 2012
Mr. Joseph Adler
Montgomery County Government
Scenario 2
Group A
IncreaseJ(Oecrease) in
Union
Non-union
Total
Accrued Liability
Normal Cost
FY2013 Contribution
$0
$0
$0
$201,000
$7,000
$21,000
$201,000
$7,000
$21,000
Group E
Increase/(Decrease) In
Union
Non-union
Total
Accrued Liability
Normal Cost
FY2013 Contribution
$1,577,000
.$94,000
$200,000
$135,000
$6,000
$15,000
$1,712,000
$100,000
$215,000
Group H
IncreaseJ(Decrease) in
Union
Non-union
Total
Accrued Liability
Normal Cost
FY2013 Contribution
$263,000
$10.000
$28,000
$0
$0
$0
$263,000
$10,000
$28,000
All groups A. E, H
Increase/(Decrease) in
Union
Non-union
Total
Accrued Liability
Normal Cost
FY2013 Contribution
$1,840,000
$105,000
$228,000
$336,000
$13,000
$36,000
$2,176,000
$118,000
$264,000
Total Increase from Base Scenario
Increasel(Decrease) in
Union
Non-union
Total
Accrued Liability
Normal Cost
FY2013 Contribution
$159,000
$8,000
$19.000
$67,000
$2,000
$7,000
$225,000
$11,000
$26,000
. . MARSH
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IVIERCER
Page 6
April 9, 2012
Mr. Joseph Adler
Montgomery County Government
Scenario 3
Group A
Increase/(Decrease) in
Union
Non-union
Total
Accrued Liability
Normal Cost
FY2013 Contribution
$0
$0
$0
$213,000
$8,000
$22,000 .
$213,000
$8,000
$22,000
Group E
Increase/(Decrease) in
Union
Non-union
Total
Accrued Liability
Normal Cost
FY2013 Contribution
$1,604,000
$96,000
$204,000
$138,000
$6,000
$15,000
$1,742,000
$102,000
$219,000
Group H
IncreaseJ(Decrease} in
Union
Non-union
Total
Accrued Liability
Normal Cost
FY2013 Contribution
$278,000
$11,000
$30,000
$0
$0
$0
$278,000
$11,000
$30,000
All groups A, E, H
Increase/(Oecrease} in
Union
Non-union
To1a1
Accrued Liability
Normal Cost
FY2013 Contribution
$1,882,000
$107,000
$233,000
$351,000
$14,000
$37,000
$2,233,000
$121,000
$271,000
Total Increase from Base Scenario
Increase/(Decrease) in
Union
Non-union
Total
$283,000
$14,000
$33,000
Accrued Liability
Normal Cost
FY2013 Contribution
$201,000
$11,000
$24,000
$82,000
$3,000
$9,000
~
MARSH
&
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~COMPANIES
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fit
IVIERCER
Pagel
April 9. 2012
Mr.
Joseph
Adler
Montgomery County Government
Note that the portion of the contribution due to the change in Actuarial Accrued Liability is
amortized as a level percentage of assumed payroll over 20 years.
Please also note that the results shown above reflect the impact on the FY2013 contribution. If
these changes are adopted, they may first be reflected in the 2012 actuarial valuation report and
FY2014 budgeted contribution, or even later (depending on when the changes are adopted and
when the County decides to reflect them).
Additional Considerations
With the changes to disability benefits for certain service-connected disablements, it is possible
that the frequency of disability claims could change. This could change the impact on County
contribution amounts shown in this letter.
Additionally, in the short term, the more generous COLAs available for service retirement benefits
for service prior to June 30, 2011, as opposed to disability retirements after June 30, 2011, could
result in a decrease to the number of disability claims in the near future.
We did not attempt to quantify the impact of either of the above.
Impacts on any amounts reflecting the most recent GASB 27 exposure draft have not been
incorporated into the results in this letter. This would require additional calculations beyond the
scope of this letter.
Important Notices
Mercer has prepared this letter exclusively for Montgomery County; Mercer is not responsible for
reliance upon this letter by any other party. Subject to this limitation, Montgomery County may
direct that this letter be provided to its auditors.
.
The only purpose of this letter is to provide analyses of the specified changes on annual
contribution amounts in order to help the County analyze its options. This letter may not be used
for any other purpose; Mercer is not responsible for the consequences of any unauthorized use.
Decisions about benefit changes, granting new benefits, investment policy, funding policy, benefit
security and/or benefit-related issues should not be made on the basis of this letter, but only after
careful consideration of alternative economic, financial, demographic and societal factors,
including financial scenarios that assume future sustained investment losses.
. . . . . MARSH
&
McLENNAN
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MERCER
Page 8
April 9, 2012
Mr. Joseph Adler
Montgomery County Govemment
This letter only represents a snapshot of a Plan's estimated financial condition at a particular point
in time; it does not predict the Plan's future financial condition or its ability to pay benefits in the
future and does not provide any guarantee of future financial soundness of the Plan. Over time, a
plan's total cost will depend on a number of factors, including the amount of benefits the plan
pays, the number of people paid benefits, the period of time over which benefits are paid, plan
expenses and the amount earned on any assets invested to pay benefits. These amounts and
other variables are uncertain and unknowable at
~he
date of the analysis.
Because modeling all aspects of a situation is not possible or practical, we may use summary
information, estimates, or simplifications
of
calculations to facilitate the modeling of future events
in an efficient and
cost~effective
manner. We may also exclude factors or data that are immaterial
in our judgment. Use of such simplifying techniques does not, in our judgment, affect the
reasonableness of analysis results for the plan.
To prepare this letter, actuarial assumptions, as described herein and in the July 1,
2d11
actuarial
valuation report, are used in a forward looking financial and demographic model to select a single
scenario from a wide range of possibilities; the results based on that Single scenario are included
in this letter. The future is uncertain and the plan's actual experience will differ from those
assumptions; these differences may be Significant or material because these results are very
sensitive to the assumptions made and, in some cases, to the interaction between the
assumptions.
Different assumptions or scenarios within the range of possibilities may also be reasonable and
results based on those assumptions would be different. As a result of the uncertainty inherent in a
forward looking projection over a very long period of time, no one projection is uniquely "correct"
and many alternative projections of the future could also be regarded as reasonable. Two different
actuaries could, quite reasonably, arrive at different results based on the same data and different
views of the future. Due to the limited scope of Mercer's assignment, Mercer will not perform or
present an analysis of the potential range of future possibilities and scenarios when requested. At
the County's request, Mercer is available to determine the cost of a range of scenarios.
Actuarial assumptions may also be changed from one valuation to the next because of changes in
mandated requirements, plan experience, changes in expectations about the future and other
factors. A change in assumptions is not an indication that prior assumptions were unreasonable
when made.
The calculation of actuarial liabilities for valuation purposes is based on a current estimate of
future benefit payments. The calculation includes a computation of the "present value" of those
~
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rvlERCER
PageS
Apri19,2012
Mr. Joseph Adler
Montgomery County Government
estimated future benefit payments using an assumed discount rate; the higher the discount rate
assumption, the lower the estimated liability will be. For purposes of estimating the liabilities
(future and accrued) in this letter, the County selected an assumption based on the expected long
term rate of retum on plan investments, Using a lower discount rate assumption, such as a rate
based on
long~term
bond yields, could substantially increase the estimated present value of future
and accrued liabilities, thus increasing the savings estimated in this letter, but also increasing the
cost of the remaining benefits.
Because analyses are snapshots in time and are based on estimates and assumptions that are
not precise and will differ from actual experience, contribution calculations are inherently
imprecise. There is no uniquely "correct" level of contributions for a particular plan year.
Valuations do not affect the Ultimate cost of the Plan, only the timing of contributions into the Plan.
Plan funding occurs over time. Contributions not made this year, for whatever reason, including
errors, remain the responsibility of the Plan sponsor and can be made in later years. If the
contribution levels over a period of years are lower or higher than necessary. it is normal and
expected practice for adjustments to be made to future contribution levels to take account of this
with a view to funding the plan over time.
Data, computer coding, and mathematical errors are possible in the preparation of results
involving complex computer programming and thousands of calculations and data inputs. Errors in
a valuation discovered after its preparation may be corrected by amendment to this analysis letter.
Assumptions used are based on the last experience study, as adopted by the County and the
Board of Investment Trustees. The County is responsible for selecting the plan's funding policy,
actuarial valuation methods, asset valuation methods, and assumptions. The policies, methods
and assumptions used in this letter are those that have been so prescribed and are described
herein. The County is solely responsible for communicating to Mercer any changes required
thereto.
To prepare this letter Mercer has used and relied on financial
~ata
and participant data supplied
by the County and summarized herein. The County is responsible for ensuring that such
participant data provides an accurate description of all persons who are partiCipants under the
terms ofthe plan or otherwise entitled to benefits as of July 1, 2011 that is suffiCiently
comprehensive and accurate for the purposes of this report. Although Mercer has reviewed the
data in accordance with Actuarial Standards of Practice No. 23, Mercer has not verified or audited
any of the data or information provided.
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IVIERCER
Page 10
April
9.
2012
Mr. Joseph Adler
Montgomery County Government
Mercer has also used and relied on the plan documents, including amendments, and
interpretations of plan provisions, supplied by the County as summarized herein. We have
assumed for purposes of this letter that copies of any official plan document including all
amendments and collective bargaining agreements as well as any interpretations of any such
document have been provided to Mercer along with a written summary of any other substantive
commitments. The County is solely responsible for the validity, accuracy and comprehensiveness
of this information.
If
any data or plan provisions supplied are not accurate and complete, the
results may differ significantly from the results that would
be
obtained with accurate and complete
information; this may require a later revision of this report. Moreover, plan documents may
be
susceptible to different interpretations, each of which could be reasonable, and that the different
interpretations could lead to different results.
The County should notify Mercer promptly after receipt of this letter
if
the County disagrees with
anything contained in this report or is aware of any information that would affect the results of this
report that has not been communicated to Mercer or incorporated therein. This report will be
deemed final and acceptable to the County unless the County promptly provides such notice to
Mercer.
All costs, liabilities, and other factors under the plan were determined in accordance with generally
accepted actuarial principles and procedures. Funding calculations reflect the provisions of current
statutes and regulations issued hereunder. In our opinion, the actuarial assumptions are
reasonable and represent our best estimate of the anticipated experience under the plan.
~
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MERCER
Page 11
April 9, 2012
Mr. Joseph Adler
Montgomery County Government
Professional Qualifications
We are available to answer any questions on the material contained in the report, or to provide
explanations of further details as may be appropriate. The undersigned credentialed actuaries
meet the Qualification Standards of the American Academy of Actuaries to render the actuarial
opinion contained in this report. We are not aware of any direct or material indirect financial
interest or relationship, including investments or other services that could create a conflict-of·
interest, that would impair the objectivity of our work.
Sincerely.
Principal
D~R:e, ~
MAAA. EA
Copy:
Belinda Fulco, Montgomery County Government
The information contained in this document (including any attachments) is not intended by
Mercer to be used, and it cannot be used, for the purpose of avoiding penalties under the
Internal Revenue Code that may be Imposed on the taxpayer.
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Bill 45-10 Excerpt
Sec. 4. Collective bargaining.
W
It
is the policy of Montgomery County that all County employees should have a
multi-tier service-connected disability retirement system which includes a:
ill
partial incapacity service-connected disability retirement benefit for
any
injurv or illness
that~events
an employee from continuing in the
employee's current position but does not prevent the employee from
engaging in other substantial gainful eIIlplovrnent; and
ill
total incapacity service-connected disability retirement benefit Jor any
iniJ.Lry
!hl
(£:}
or illness that prevents an emplQY&e from en.,gaging in any other
substal1tial gainful employment.
It
is also the P9licy of the COUTlty thatdisability benefits are a mandatory subject
of cQllective bargaining with each appropriate certified employee representative.
Notwithstanding any County law to the: contrarv, the County Executive may
separately negotiate the terms of an
appropria~mlllti-tier
service-connected
disability retirement system with the certified employee represrntatiE..-for the
police bargaining unit and the certified representative for the
OPT
and
SLT
bargaining units, in each case not later than March 1. 2012. If in either case the
parties are unable to reach agreement on an appropriate multi-tier system, the
parties may submit this issue for resolution. through the applicable impasse
procedures under the County's police labor relations law and the County
collective bargail1ing law as a separate matter, not part of or linked to any other
collective bargaining procedure. The impasse neutral for the police bargaining
unit and the mediator/arbitrator for the
OPT.
and
SLT
bargaining units must
choose the final offer of either party after considering equally the following
factors:
ill
service-connected disability retirement systems for similar employees of
other public employers . . in the Washington Metropolitan. Area and in
Maryland;
ill
best practices for service-connected disability retirement systems for
similar employees in the Ul1ited
Stat~
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ill
ill
the interest and welfare of the public: and
the IQng-term ability of the employer to finance a disability retirement
§,Ystem, and the effect of the cost of the system on the normal standard of
public services provided by the employer.
@
The Executive must submit the results of any collective bargaining prQcess
regarding this issue to the Council for legislative acti9n not later than AprilL
2012.
2
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OFFICE OF THE COUNTY ATTORNEY
Isiah Leggett
County Executive
Marc P. Hansen
County Attorney
MEMORANDUM
TO:
FROM:
DATE:
RE:
Robert Drummer
Amy S. Moskowitz
May 3, 2012
Bill 18-12
You asked our office to opine on whether the provision contained in Bill 18-12 which requires
the cessation of service connected disability benefits for members of Groups E, F or H while
they are in a correctional facility is lawfuL We believe, with a different effective date, such a
prohibition is permissible.
Federal law, specifically Internal Revenue Code Section 401(a)(13) and ERISA Section 206,
would prohibit such a restriction on a private, ERISA plan. These provisions, with certain
exceptions, prohibit benefits under a qualified retirement plans from being assigned or alienated.
However, governmental pension plans are not subject to these provisions.
Governmental retirement plans are largely governed by state law. Maryland case law has stated
pensions are contractual in nature.
Frederick
v.
Quinn,
35 Md. App. 626;
Howell
v.
Anne
Arundel County,
14 F. Supp. 2d 752, 754 (D. Md. 1998). These cited cases also discuss under
what circumstances existing benefits may be changed and provide that future benefits may be
changed.
I
While no Maryland case discusses forfeiting governmental pension plans, Attorney
General Opinion 1980 Md. AG LEXIS 15; 65 Op. Atty Gen. Md. 445 discusses Governor
Mandel's conviction for mail fraud and racketeering and the forfeiture of his pension benefits.
The Attorney General stated that Mandel was entitled to his pension because pension benefits are
contractual rights and where no express provision in the law allows for such a forfeiture one
cannot be implied.
Our opinion to the Office of Legislative Oversight dated October 28, 20 10 discussed the contractual issues
associated with retirement plans in detail.
I
101 Monroe Street, Rockville, Maryland 20850-2540' i.\.!lli:'.JlIi)skowitz'ii'Jnolltgomervcotllltvmd.l'.ov
240-777-6793' TTD 240-777-2545' Fax 240-777-6705
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While the proposed forfeiture provision is uncommon, both New Jersey and Massachusetts have
similar provisions in their laws.
2
New Jersey 43:1-2 states:
43: 1-2. Suspension of right, or disqualification, during confinement in penal institution
No pension or subsidy shall be paid by this State or by any municipality or school district
of this State to any person for the period during which he is confined in a penal institution
as a result of conviction of a crime involving moral turpitude, and such person shall lose
all right to so much pension or subsidy as he would receive or be entitled to receive had
he not been so confined; provided, that nothing herein contained shall prevent the
payment of the pension for the sole benefit of the mother, father, wife or minor children
of the person so confined in a penal institution if the board or commission administering
the pension fund shall determine that such pension is necessary for their maintenance
and, thereupon, the board or commission shall provide for the payment to the aforesaid
person or persons so determined to be entitled to the benefit of the pension.
Massachusetts Chapter 32 Section 7 provides for that a service connected disability benefit:
d) Payments to a member retired under the provisions of this section who is incarcerated
for having been convicted of a felony committed on or after the effective date [July 1,
1996] of this paragraph shall cease for the period of such member's incarceration. Under
no circumstances shall such payments be recoverable by such member after such period
of incarceration.
No court has determined these statutes to be unconstitutional. In
Salley
v.
Firemen's
&
Policemen's Pension Fund Com,
11
A.2d 244 (N.J. 1940), the New Jersey supreme court upheld
a correctional facility forfeiture law and applied it to a member receiving benefit payments when
the law was enacted stating that the member did not have a contractual right to pension benefits.
More recently, the court applied the law In rc Ceres, 2011 N.J. Super. Unpub. LEXIS
120&
(App.Div.
May 11.
201
1)
and noted that "the Legislative purpose of the provision is to deny
double payment to an incarcerated State retiree, who is being sustained at State expense in
prison."
Therefore,
it
appears permissible for the Council to enact such a provision. However because
pension benefits are contractual, changes usually cannot apply retroactively. The legislation
applies to benefits paid "after July 1, 2012". This would apply to current retirees as well as
members who have already satisfied the conditions for a service connected disability retirement.
It
is questionable whether adding an ongoing additional requirement which did not apply at the
date of retirement could apply to current retirees without an analysis under the contract clause.
The effective date could apply to disability applications filed on and after July 1,2012.
2
Many states do have forfeiture provisions relating to crimes members relating to their government employment.
See
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Testimony before the County Council
on Bill 18-12, Personnel - Disability Retirement - Eligibility and Benefits
May 8,2012
I am Joan Fidler, President of the Montgomery County Taxpayers League. Thank you for the
opportunity to testify on Bill 18-12 regarding disability retirement benefits.
This Bill 18-12 is not an improvement over Bill 45-10, that we supported, and you passed last
year. Your Bill created two levels of disability retirement benefits with payouts somewhat
similar to those of the surrounding jurisdictions. This Bill creates a third, largely unnecessary
level of retirement benefit, one that blurs the distinction between "catastrophic" and "total"
incapacity, both with the same definition. This Bill also increases the percentage of payouts to
levels exceeding those in surrounding jurisdictions. Why?
Let me state at the outset, my testimony does not denigrate the services of our police officers
and county workers. They are competent, able and dedicated. My testimony focuses on the
costs associated with this new bill at a time when we have a maintenance of effort law that is
eroding our revenues, a shift of teachers pensions that will mortgage our future and the
cumulative effect of compensation decisions in the past that have caused our structural
budget deficit.
As to the specifics of Bill 18-12, creating a new category called "catastrophic" and tying that to
a 90% tax-free payout is unfathomable. In Baltimore County, the payout for dismemberment
and paralysis is 75%; everywhere else it is
66-2/3%.
Yes, it would appear mercenary to put a
dollar figure on the totally incapacitated but all our surrounding counties do.
But the real budget buster is raising the tax-free payouts for "partial" incapacity from
52-1/2%
to 60%. Eighty-five percent of disability retirements fall into this category. I don't know if the
picture has changed but between 2004 and 2008, 40% of our police force was retiring on
disability. I am not privy to the number of disability retirements between the passage of Bill
45-10 last June and projections through this June but I would
w~ger
they are far higher than
those in surrounding jurisdictions. Are their police officers stronger and fitter than ours? Are
their police officers less competent and dedicated than ours? Why the higher payouts in
Montgomery County?
Finally, this new Bill includes a new disability "functional deafness". This new disability has no
definition. Something is rotten in the state of Denmark.
Bill 18-12 does nothing to improve on Bill 45-10 but it does excel in one category - it raises
costs. The Taxpayers League cannot support
the~ill
as it stands.
Thank you.
- Joan Fidler
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Montgomery County Lodge 35, Inc.
185-12 OtIice Park Drive
Montgomery Village, MD 20886
Phone: (301) 948-4286
Fax: (301) 590-0317
Statement of
Fraternal Order of Police Montgomery County Lodge #35
Public Hearing on
Bill 18-12
May 8, 2012
It
has been more than three years since two assistant Montgomery County police chiefs became the
poster children for a mismanaged disability retirement system. Although fully able and employed
police managers, they left Montgomery County no longer able to work as police officers, then took
lucrative law enforcement management jobs in other jurisdictions. In the weeks that followed these
revelations, disabled working police officers - the officers who actually respond to 911 calls - were
vilified, demonized and accused of fraud and abuse without benefit of facts or evidence to support
the accusations. All that was levied against them were statistics and inference.
Bill 18-12 arises from an agreement reached between the Fraternal Order ofPolice #35 and the
County Executive pursuant to a process and criteria established by this County Council. This
Council's clear intent was to give collective bargaining a chance to resolve this issue. The Council
also recognized that the established tiers for firefighters were part of an overall retirement
agreement.
Contrary to the rhetoric, this Council established the law and set the criteria for this agreement.
There was a hearing based upon the Council's criteria. Testimony and evidence was offered. There
is a record of the hearing. To meet the Council's criteria the FOP 35 made concessions. Based
upon the process and the criteria set up by the Montgomery County Council, and the evidence and
testimony offered, the arbitrator chose the
FOP
35's fmal offer as the more reasonable.
It
is not a
concession to FOP 35 to respect the collective bargaining process. The County Charter clearly
provides for binding arbitration of matters subject to collective bargaining.
Let it be stated again, on average
11
police officers have retired disabled each year since 1985.
An
examination was conducted of every disability determination by the County. The examination
found that NOT ONE disability retirement awarded to a police officer was undeserved.
In
fact, no
fraud or abuse was ever identified. Still, no one apologized to those disabled officers whose
reputation was sullied by association with the unsubstantiated outcries of "fraud and abuse" rising
from the actions oftwo assistant police chiefs.
This bill represents the last piece of a mutually agreed upon reform ofthe disability retirement
system reached FOP 35 and the County Executive and enacted by the Council in Bill 37-08. Bill
37-08 codified the agreements in direct response to concerns that arose from police managements'
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abuse of the disability retirement system and lax stewardship by the County Executive. What has
been enacted included among other things:
1. Requiring an independent medical examination in each application for disability retirement.
2. Changes to the disability panel including size of panel, selection procedures, qualifications,
authority to engage an additional independent medical examiner and number of panel
members required to make a decision on an application.
3. An offset in disability benefits for Workers Compensation payments received by an
applicant.
4. Establishing a reporting requirement for work related injuries.
5. Deadlines for filing for a disability retirement for a work related injury.
6. Requiring annual medical examinations for disability retirees for five years after retirement
and once every three years thereafter until age 55.
7. Requiring a deduction for non-Social Security benefits received for the same injury from
another employer.
8. Limitations on filing for disability retirement after separation.
9. Permitting a reduction in benefit for outside earnings from a sworn law enforcement job.
The notion of a multi-tiered disability system has been on the table since the beginning, as has been
the mutually three-tier structure you now see before you. This would have been resolved years ago
had the County Executive been willing to come to an agreement on the issue.
Police work is fraught with hazards and police officers become disabled. As we speak, police
officers are taking risks for the community. We have given them a car, a handgun, a baton and other
tools and told them to use these to protect the community.
In
fact we tell them it is their job not to
swerve from the path of duty. For what we ask ofthem, there must be protection for police officers
and their families should they be hurt. Any change in the benefit level of a disabled police officer
and her or his family should be carefully weighed against the possibility of hesitation by officers
when taking any necessary action to protect the public. No police officer should have to hesitate to
consider her or his financial situation before acting to protect a member ofthe community.
When this bill is passed into law, a janitor in the MCPS will have a higher disability benefit than a
Montgomery County Police officer, so will a teacher. A Maryland State Trooper working in
Montgomery County will have a higher disability benefit, so will a police officer working across the
river in Fairfax who is forced to leave her job. Whether a disabled police officer receives 60,
662/3
or 90 percent of their final pay, they remain disabled. They have suffered standing the line in
service to the community.
Police officers will accept this agreement, despite feeling that they have been targeted for political
reasons. They will accept it because it is the product of a process. There is no gain for police
officers in this agreement.
It
is all concessions and if enacted will save the County millions of
dollars from the current benefit level.
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McTIGUE
&
VEIS
LLP
4530'Wisconsin Avenue, NW
Suite 300
Washington, D.C. 20016
(202) 364-6900
Fax: (202) 364-9960
Testimony
Montgomery County Council
on Disability Changes
in
Montgomery County
by
Brian McTigue
May 8, 2012
Council President Berliner and Council Members:
My name is Brian McTigue. I am here to speak against Bill 18-12.
This bill will undo the real refonns this Council passed last year. Refonns that were difficult to
arrive at. And refonns involved a great deal of the Council's time and energy, at the committee
and full council levels.
Bill 8-12 fails to address the scandalous situation that brought disability pay to the public's
attention.
I am an attorney specializing in employee benefits. I've served on the Committee which
nominated the candidates for Montgomery County Inspector GeneraL More recently I served on
the Task Force for Public Employee Benefits. Both appointments were by the Council. I have
lived in Montgomery County for 25 years.
Bill 45-10 was passed to address a scandal that developed when it appeated inordinate numbers
of police were successful in claiming disability benefits, benefits that often nearly equaled their
final salary -- regardless of their level of disability. Bil145-10 rightly distinguishs between
those unable to find other work because of their disability, and those whose partial disability
allows them to work in another field.
Narro'vving the gap between full and partial disability, as the County's arbitrator contends,
ignores the incentives that led to the scandal in the first place.
It
would allow what amounts to a
scam to continue, to the detriment of County taxpayers and County employees with disabilities
who need to be protected.
The refonns previously passed by this Council bring benefits in line with surrounding counties.
These benefits are adequate and treat County Employees fairly. Bill 18-12 seeks to keep
Montgomery county taxpayers on the hook for the most generous benefits in the area, benefits
which are more generous than necessary.
Confidential: Attorney-Client Privilege, Attorney Work Product
@
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It
is paramount that the county care for those with disabilities through a just system that provides
for those who become disabled serving the county. Those goals were addressed properly by this
Council in the previous bill. Allowing the Arbitrator to change the system and undo these
necessary
--
and thoughtful
--
reforms would allow a scandalous system to continue, costing
taxpayers unnecessary millions.
I urge you to defeat bill 18-12, which will protect the valuable reforms the council has already
passed. Thank you.
..
Confidential: Attorney-Client Privilege, Attorney Work Product
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Page 1 of2
Drummer, Bob
From:
Sent:
To:
Cc:
Duchy Trachtenberg [duchy.trachtenberg@gmail.com]
Tuesday, May 08, 2012 8:30 AM
Greenberger, Neil
Drummer, Bob; Farber, Steve
Subject: Fwd: Letter re: Bill 18-12
FYI
Begin forwarded message:
From:
Duchy Trachtenberg <duchy.trachtenberg@gmaiLcom>
Subject: Letter re: Bill 18·12
Date:
May 8, 2012 8:26:00
AM EDT
To:
roger.berliner@montgomerycountymd.gov,
councilmember.berliner@montgomerycountymd.gov
Cc:
phil.andrews@montgomerycountymd.gov,
councilmember.andrews@montgomerycountymd.gov
11212 Empire Lane
N Bethesda, Maryland 20852
May 8,2012
Montgomery County Council
Council President Roger Berliner
100 Maryland A venue
Rockville, Maryland 20850
Dear Council President Berliner:
I am writing in reference to Expedited Bill 18-12, which was introduced at the request of the County Executive, I am most interested in this
particular legislation as I helped draft and introduced (during my Council term) Bill 45-10, which eventually was passed by the Council and
is current law, I understand that Bill 18-12 reflects the terms defined
by
the County arbitrator although importantly, these terms were defined
outside of the normal collective bargailling process, Hence the Council does not need to indicate its intent to reject or approve this legislation
by May 15,
I am concerned over the terms set forth in this proposed legislation, specifically in relation to the compensationibenefit levels outlined for the
three-tier system of disability retirement This multi-tiered approach is a best practice and with merit However, the compensation levels as
outlined are not in keeping with national best practices, Council staff has indicated that nearby jurisdictions have taken a more modest
approach especially for any partial incapacity, In several conversations with national policy experts and local administrators from various
jurisdictions, the following ranges are what have been recommended to me as appropriate and effective in the utilization of any three-tier
system:
Partial Disability - 40% to 55% of salary as benefit
Full Disability - 55% to 70% of salary as benefit
5/8/2012
@
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Page 2 of2
Catastrophic Disability
75% to 90% of salary as benefit
As outlined in Bill 18·12, the partial and full disability benefits are almost equal. This is problematic as a partial incapacity has far difterent
parameters than a permanent full disability,
The financial implications of these compensation adjustments are very troubling, If these changes were agreed to, County government would
need to identify well over a million dollars to cover the cost (firefighters would need an adjustment as well) of increased benefit levels. for
just this next fiscal year alone, Given the uncertainty of state revenue and the pressing obligations of adequate funding for education and vital
social programming, it would not be financially sound at this time to make such a large commitment, recognizing the unsustainable nature of
such a commitment
I believe investments in our County employees are important and would recommend that the Council consider some additional resources be
applied to the area of occupational health (medicine), There is compelling evidence that such programming investments yield positive
benefits, A tocus on prevention contributes to more employee productivity and often times decreases the amount of disability retirement
applications,
I thank you in advance for your thoughtful consideration of my letter. I am confident that a fair and equitable system of disability retirement
for valued County employees will be maintained as the current law does reflect national best practices,
Respectfully,
Honorable Duchy Trachtenberg
CC: Councilmember Phil Andrews, Chair, Public Safety Committee
5/8/2012
@