Agenda Item 65

May 8, 2012

Public Hearing

PLEASE RETAIN THIS PACKET FOR MAY 9

PS/GO

COMMITTEE

MEMORANDUM

May 4,2012

TO:

FROM:

SUBJECT:

County Council

Robert H. Drummer, Senior Legislative Attorney

~

Public Hearing:

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 Safety/Government Operations and Fiscal Policy

Committee worksession is tentatively scheduled tor May 9 at 9:30 a.m.

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.

Background

Bill 45-10, Personnel - Disability Retirement- Eligibility - Total and Partial Incapacity,

enacted on June 28, 2011, amended the disability retirement laws to create the same two-tier

system for police and general government employees that already existed for fire and rescue

employees. Under Bill 45-10, a service-connected partial incapacity disability retirement is at

least

52Yz%

of final pay and a service-connected total incapacity disability retirement is at least

70% of final pay for all employees. Bill 45-10 takes effect for a disability that occurs on or after

July 1,2012.

However, Bill 45-10 also contained an uncodified section that permitted either the FOP

or MCGEO to bargain with the Executive over disability retirement as a separate issue this year.



See ©52-53. The parties were permitted to submit an impasse in bargaining to arbitration as a

separate issue on a fInal offer basis this year only.

1

The FOP and the Executive negotiated this

issue without reaching an agreement, and they submitted the impasse to an arbitrator for

resolution. A copy of the arbitrator's decision is at ©14-27.

The arbitrator resolved the following issues by selecting the FOP's fInal offer.

1.

The FOP and the Executive both proposed a 3-tier system before arbitration: 60%

of fInal pay for partial, 66%% for total incapacity, and 90% for catastrophic

incapacity. The parties did not agree on the defInition of catastrophic incapacity

or if the pension would be integrated with Social Security.

The Executive's fInal offer would reduce the amount of the pension when the

retiree reaches normal Social Security retirement age (integrate with Social

Security). Current disability retirement pensions do not integrate, but normal

County retirement pensions do integrate. The FOP final offer did not integrate

with Social Security benefIts.

The Executive's final offer would prohibit a service-connected disability

retirement award to an employee who is convicted of a significant criminal act.

The FOP final offer would stop a disability retirement pension benefit only while

the employee is incarcerated. Bill 45-10 prohibits a disability retirement award to

a person who commits an offense that would justifY termination for misconduct.

2.

3.

Although MCGEO did not participate as a party in the arbitration, the County Executive

and MCGEO agreed in advance that the arbitrator's decision would include employees

represented by MCGEO. See ©28. Therefore, Bill 18-12 includes employees represented by the

FOP and employees represented by MCGEO.

As required by the uncod(fied section ofBill 45-10, the Executive transmitted Bill

1

~-12

to the Council on April

23

to implement the arbitrator's decision. Since this arbitration was

outside ofthe 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 ofBill 45-10 would take effect on July 1,2012.

Issues

1.

What is the fiscal impact of the Bill?

The County's actuary estimated that Bill 18-12, if enacted, would raise the County's

required annual pension contribution by at least $661,000 for Group F (Police) and an additional

$209,000 for MCGEO employees in FY13 and each year after. Mercer also estimated that the

County's accrued liability due to the changes in this Bill would increase by at least $5.566

I

Disability retirement remains a subject for bargaining in future years as part of a collective bargaining agreement.

2



million for Group F and an additional $1.681 million for MCGEO employees. See the OMB

fiscal impact statement at ©29-51. The Executive did not include funding for this additional cost

in his FY13 Recommended Budget or in his April 26 FY13 Budget Amendments. Based upon

Mercer's actuarial valuation, the Executive's FY13 Recommended Budget assumes a savings of

$1.9 million due to the changes made by Bill 45-10 last year.

Based upon the County's experience with the two-tier system for fire and rescue

employees since 2000, 85% of service-connected disability awards will be for partial incapacity.

Although Bill

18-12

creates a new, potentially costly, catastrophic incapacity category payable

at 90% offinal pay, the overwhelming majority ofthe extra expense from Bill

18-12

results from

raising the minimum partial incapacity benefit from 52Yz% offinal pay to 60% offinal pay.

2. What are the disability retirement provisions in other local jurisdictions?

Bill 45-1 0 required the arbitrator to consider:

(1) service-connected disability retirement systems for similar employees of

other public employers in the Washington Metropolitan Area and in

Maryland;

(2) best practices for service-connected disability retirement systems for

similar employees in the United States;

(3) the interest and welfare of the public; and

(4) the long-term ability of the employer to finance a disability retirement

system, and the effect of the cost of the system on the normal standard of

public services provided by the employer.

The arbitrator considered other systems only with regard to whether the disability benefit

should be integrated with Social Security benefits because both parties proposed 60% for partial,

66% for total, and 90% for catastrophic incapacity. However, it is impossible to compare the

disability benefits that would be established by Bill 18-12 to disability benefits in other

jurisdictions without looking at the entire benefit. Council staff surveyed some of the police and

2

fire disability retirement plans in other jurisdictions to compare them with Bill 18-12. Here is a

summary ofthe results of this survey.

A.

Fairfax.

Fairfax County police disability is covered by Fairfax Municipal Code

§§

3­

7-28 to 3-7-29. Service-connected total disability retirement is 662,-'3% of final salary until the

employee's service credit reaches 25 years when it is reduced to 60% of final salary. Fairfax

defines partial disability as the inability to perform some of the duties of the position.

Employees on partial disability are not permitted to retire on disability if the Department has a

job they can perform. If the Department does not have a light duty position for a partially

disabled employee, the employee is permitted to retire on total disability and receives the' same

66%% benefit. Again, the benefit drops to 60% when the disabled employee reaches 25 years of

credited service or age 55. See ©54-55.

B. Howard County.

Police and Fire receive 66%% of final salary for a catastrophic

injury and 50% of final salary for a non-catastrophic injury. The catastrophic injury follows the

Although the Executive agreed to include MCGEO employees in the results of the arbitration with the FOP, most

jurisdictions provide a more generous disability retirement benefit for police and fire than for non-public safety

employees. Council staff believes that a comparison with police and fire disability plans is more relevant.

2

3



Social Security disability standards and is similar to the definition of total incapacity in Bill 45­

10. See ©56-58.

C. Baltimore County. Police and Fire employees receive 75% of average final earnings

for dismemberment or paralysis of certain body parts. Police and Fire employees receive 66%%

of average final earnings for the service-connected loss of use of certain body parts or major life

functions. All lesser service-connected disabilities are paid at 50% of average final earnings.

See ©59-60.

D. District of Columbia. Police and Fire employees are rated for a percentage of

disability and receive 70% of final pay multiplied by the percent of disability. A service­

connected disability pension must be at least 40% of final pay. See ©61-63.

E. Anne Arundel County. Police are eligible for a service-connected disability

retirement pension of at least 66%% of average pay3 for total and partial incapacity. However,

an employee is disqualified from receiving a disability pension if the employee refuses to take

another position with the County that the person can perform within the first 5 years after

retirement. See ©64-65.

F. Prince George's County. Police and Fire employees hired after 1989 are eligible for

a partial incapacity disability pension of 55% of final pay. Employees who are unable to

perform any substantial gainful activity are eligible for a pension of90% of final pay. According

to Prince George's County Retirement staff, the 90% pension is very rare.

It appears that the benefits provided in Bill

18-12

would be more generous than all of

these other local jurisdictions, with the possible exception ofAnne Arundel County.

3. What is the history behind the Council's enactment of Bill 45-10?

The Inspector General raised some significant concerns about the County's police

disability retirement system in an interim report issued in September 2008.

4

The Inspector

General found that 62% of the police officers who retired between 2004 and 2008 received

disability retirement awards. The Council began looking at the police disability retirement law

soon after receiving this report. At the same time, an Executive-appointed task force issued

recommendations to reform the disability retirement system. Recognizing the County's policy

that disability retirement is a mandatory topic of collective bargaining, the Council asked the

Executive to try to negotiate reforms to the disability retirement system with the FOP. The

Executive's negotiations with the FOP did not result in a final agreement, but some progress was

made in 2009 on certain procedural issues.

The Council enacted amendments to the disability retirement system in Bill 37-08 on

May 12, 2009. Bill 37-08, as enacted, incorporated only those interim agreements between the

Executive and the FOP on procedural issues. One ofthe most significant amendments in the Bill

as introduced, but not in the Bill as it was enacted, was to extend the two-tier fire system for

service-connected disability benefits to police employees. At the Council's request, the Office of

3

Average pay is generally less than final pay used in

Bill 18-12.

4

The Inspector General's Report can be found at

bnn.;:1\:.y.~vw.mQ!.ljgQm_erycountYmd.gQyi5;5!!tlen!.d!1~12-ectOl:gfdis~bfin.aliillt,:.[i!n09()908.p-df.

4



Human Resources provided information on the County's experience with the same two-tier

system for fire and rescue employees. As of May 2009, only 10 of the 67 fire and rescue

employees who received a service-connected disability retirement since the two-tier system

began in 2000 were awarded the higher 70% benefit. Therefore, 85% of the awards were at the

lower

52YS%

partial incapacity level. In 2009, the County's actuary, Mercer, estimated the

annual savings to the County's retirement contribution for extending the two-tier fire system to

Group F (Police) to be more than $1.5 million based upon an assumption that 60% of the

disability retirements would be at the lower level. If the Group G (Fire and Rescue) experience

of 85% at the partial incapacity level was carried over to all employees, the actuary estimated the

annual savings would be more than $2.7 million.

After another year with no final agreement between the Executive and the FOP on

substantive reforms to the police disability retirement system, Bill 45-10 was introduced in July

2010. After a public

hearin~

and 5 joint Council Committee worksessions, the Council enacted

Bill 45-10 on June 28, 2011.

Chronology of the Disability Retirement Legislation

Here is a chronology of significant events for the Council's consideration of changes to

the disability retirement system.

1. September 2008 - Inspector General Interim Report

2. October 30, 2008 - MFP/PS Committee worksession on Report

3. December 9,2008 Bill 37-08 introduced

4. January 15,2009 - Public Hearing on Bill 37-08

5. MFP/PS Committee worksessions on Bill 37-08

February 19,2009

April 2, 2009

May 1,2009

May 4, 2009

6. May 12,2009 - Bill 37-08 enacted with amendments

7. July 27,2010 - Bill 45-10 introduced

8. September 28,2010 - Public Hearing on Bill 45-10

9. PS/MFP Committee worksessions on Bill 45-10

October 4,2010

October 25,2010

November 22, 2010

June 21, 2011 (PS/GO Committee worksession)

10. June 28, 2011 - Council enacted Bill 45-10

11. July 11,2011 Bill signed by the Executive

The Executive and the FOP negotiated a new col1ective bargaining agreement while Bill 45-10 was pending that

did not include any changes to the disability retirement system.

5

5



4. What is the purpose of the two-tier disability retirement system?

A service-connected disability retirement pension is intended to replace lost income that

an employee would have earned if the employee had been able to continue to work in his or her

position until normal retirement.

6

Total incapacity is defined as the inability to perform any

substantial gainful activity. Partial incapacity is a disability that prevents the employee from

continuing to perform the duties of his or her current position, but would still permit that person

to perform the duties of another position. This distinction is most important in public safety

positions where many employees suffer from injuries that prevent them from performing the

essential duties of a public safety position, but do not prevent the employee from performing the

essential duties of other positions. For example, a serious knee injury may become a permanent

impairment that prevents an employee from passing a mandatory physical fitness test for a police

officer, but would still permit that employee to work as a private security consultant.

If an employee suffers a permanent service-connected injury or illness that would prevent

the employee from working at any job, a disability pension should replace the entire employee's

lost income. Since disability pensions are exempt from Federal and State income taxes and

Social Security taxes, a disability pension equal to 70% of final salary provides approximately

the same take-home pay as an employee's full salary. At normal retirement age, an employee

with a total incapacity disability retirement pension may receive more take-home pay than an

employee on normal retirement because the disability pension remains higher than a normal

retirement pension. Finally, at Social Security retirement age, the amount of a disability

retirement pension stays the same and a normal County retirement pension decreases to account

for the right to receive Social Security benefits.

If an employee suffers a permanent service-connected injury or illness that cuts short the

employee's career as a public safety employee, but does not prevent the employee from working

at another position, then the disability pension should only replace the extra income that the

employee could have earned by continuing in his or her current position. A tax-free disability

benefit of

52Yz%

of final pay would produce the same take-home pay as approximately 75% of

the employee's salary. The employee must earn only 25% of his or her former salary to make up

the difference. Based upon the County's experience with the two-tier fire system since 2000,

partial incapacity would make up 85% of the disability awards.

5. What is catastrophic incapacity in Bill 18-12?

Bill 18-12 would create a third tier for service-connected disability retirement called

catastrophic incapacity. This benefit would pay 90% of the employee's final pay. This would be

a tax-free benefit that will always provide significantly more take-home pay than the employee's

former salary. Both total incapacity and catastrophic incapacity would require a finding that the

employee could not perform any substantial gainful activity. Therefore, the 90% benefit for

catastrophic incapacity is not an income replacement; it is an attempt to pay an enhanced benefit

to compensate the employee for the nature of the injuries suffered by the employee.

Bill 18-12 defines a catastrophic incapacity as:

Income replacement is rarely an adequate replacement for a serious injury or illness. The disability retirement

system is not designed to provide fair compensation for an employee's pain and suffering due to the injury or illness.

6

6



Catastrophic Incapacity

means a member's inability to engage in any substantial gainful activity

because of a permanent loss or loss of use of:

(1)

both arms;

(2)

both eyes;

(3)

both feet;

(4)

both hands;

(5)

both legs;

(6)

functional deafness; or

(7)

a combination of any two of the following body parts:

(A) arm;

(B) eye;

(C) foot;

(D) hand; or

(E) leg.

This definition was taken, in part, from the definition of permanent total disability in the

Maryland Worker's Compensation Law. See Md. Code

Ann.

Labor

&

Employment §9-636.

It

is important to note that "functional deafness" was added to the definition by the FOP. The

definition of catastrophic incapacity raises several questions. For example, the loss of use of an

arm necessarily includes the loss of use of a hand. Therefore, does the loss of use of one arm

make an employee eligible for this enhanced benefit? The most important issue raised by this

definition is the meaning of "functional deafness." The FOP included functional deafness in its

last best offer to the arbitrator.

It

was not included in the Executive's last best offer.

Unfortunately, it is not defined in the

BilL

Deafness does not normally render a person unable to

perform any substantial gainful activity.

Although this category was presented as an extremely rare occurrence, it is important to

ensure that the definition is narrow enough to make that prediction accurate. The 90% benefit is

very expensive. As Mercer pointed out in its April 4 letter, each 1% of disabilities that meet this

definition instead of partial incapacity will raise the County's annual contribution by

approximately $58,000.

6. Why prohibit 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 justify 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.

7



Therefore, the employee lost no income due to disability.7 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 tum 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.

8

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

related to misconduct on the job.

This packet contains:

Expedited Bill 18-12

Legislative Request Report

Transmittal Memo from County Executive

Arbitration Decision

Memo from Executive concerning MCGEO

Fiscal Impact Statement

April 4 Mercer Letter

April 9 Mercer Letter

Bill 45-10 excerpt

Fairfax County Code Excerpt

Howard County Code Excerpt

Baltimore County Code Excerpt

District of Columbia Code Excerpt

Anne Arundel County Code Excerpt

F:\LAWIBILLS\1218 Disability Retirement-Eligibility And BenefitslPH Memo.Doc

Circle

#

1

12

13

14

28

29

33

41

52

54

56

59

61

64

The Inspector General found several cases where a police officer applied for and received disability retirement

immediately after pleading guilty to a felony.

g

See,

l!!!pj.:!I\Y~lY...:§..Q(,:'@hecl!.rLty.gov!OP

tlome/cf(WI4Q.4/404:Q:!§8.htm.

7

8



Expedited Bill No.

..:.;18::...--'-'12=--_ _ _ __

Concerning: Personnel

Disability

Retirement - Eligibility and Benefits­

Amendments

Revised: April

27, 2012

Draft No.

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 EXPEOrrEO ACT

to:

(l)

(2)

(3)

(4)

create a catastrophic incapacity service-connected disability retirement benefit for

certain employees;

modifY the amount of the benefit for a partial and total incapacity service-connected

disability retirement for certain employees;

reduce the restrictions on receiving a service-connected disability retirement benefit

for certain employees who are convicted of a crime; and

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]

Dm.!.ble 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:



EXPEDITED BILL

No. 18-12

1

2

3

4

5

6

7

8

9

10

11

Sec

1.

Section 33-43 is amended as follows:

33-43.

Disability retirement.

*

(b)

following meanings:

*

*

Definitions.

In this Section, the following words and phrases have the

*

*

~

*

member's inability to engage in any

Catastrophic Incapacity

means

substantial gainful activity because of

~

permanent loss or loss of use of:

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;

®

lID

@

(Q)

foot;

hand; or

leg.

®

*

Correctional facility

means

*

~

*

iail, 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

QL.

in

~

jurisdiction which does not classify any crime as

~

felony, is

WMBILLS\1218

Disability Retirement-Eligibility And

Benefits\BiIl3.Doc



EXPEDITED

BILL

No. 18-12

28

an offense punishable

Qy

death or

Qy

imprisonment for g term exceeding

one year.

29

30

*

*

*

31

32

33

34

35

36

37

Vocational rehabilitation program

means g court-approved program

that g 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 g reasonable time.

*

(f)

(1)

*

*

Service-connected disability retirement.

A member may be retired on· a service-connected disability

retirement if:

(A)

the member

IS

38

39

catastrophically, totally, or partially

40

41

42

incapacitated as the natural and proximate result of an

accident occurring, or an occupational disease incurred or

condition aggravated, while in the actual performance of

duty;

43

44

45

46

47

48

49

*

(E)

*

*

the member,1 except g member of Group

t.,.

E or

!b

has not

committed an offense that would justify termination for

misconduct. A member of Group

t.,.

~

or H must not be

paid g monthly benefit for any month on or after July

L

2012 if the member is confined in g correctional facility for

conviction of g felony during any part of that month unless

the member is participating in g vocational rehabilitation

program. Confinement in g correctional facility continues

as long as the individual is under g sentence of

confinement and has not been released due to parole or

Gw\BILLS\1218

Disability Retirement-Eligibility And Benefits\BilI3.Doc

50

51

52

53

54



EXPEDITED

BILL

No.

18-12

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63

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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.

(1)

Catastrophic Incapacity.

The County must

lli!Y

~

Group

H member who retires on

~

E.,.

or

service-connected disability

retirement with catastrophic incapacity an annual penSIOn

calculated under Section 33-42(b)(I), except that:

(A)

the County must substitute final earnings for average final

earnings; and

ili1

[(1)]

the pension must be at least 90% of the member's final

earnmgs.

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

66%

%

of the member's final

earnings for

~

Group

~

E.,.

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

0,\B\LLS\1218 Disability Retirement-Eligibility And Benefits\BiII3.Doc



EXPEDITED BILL

No. 18-12

82

83

84

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)]

85

86

87

88

ill

The Disability Review Panel must recommend a finding of

catastrophic incapacity or total incapacity for

~

Group

.G

~

or H

member or total incapacity for

~

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.

89

90

91

92

93

94

95

96

97

*

(D)

*

*

98

99

100

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 6673

%

for

~

101

102

103

104

Group

.G

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.

105

106

107

108

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EXPEDITED BILL

No.

18-12

109

110

111

112

113

114

115

[(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 final earnings for

~

Group

L 11

or H

member or at least 5212 % 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

(1);

and

(B)

the member is not eligible to receive a benefit for

catastrophic or total incapacity under subsection [(i)(3)]

116

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119

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121

122

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124

125

126

127

128

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133

illill

or subsection

.G.lW.

[(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 [5212] 60 %

to a benefit of at least 66% % for

~

Group

L 11

or H member or

from at least 5212 to at least 70% for

£!

member of any other

Group, if:

*

[(6)]

ill

*

*

*

*

*

[(7)]

00

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)(l), [or]

subsection (i)(2), or subsection [(i)(4)].G.lC.2).

However, if a

134

135

greater benefit results from the calculation under Section 33

42(b)(1), the County must pay a Group F member a pension

GW\B1LLS\1218

Disability Retirement-Eligibility And Benefits\Bitl3,Qoc



EXPEDITED BILL

No.

18-12

136

137

138

139

based on the member's average final earnings if that member's

average final earnings result in a greater benefit than final

earnmgs.

*

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

meanmgs:

*

*

~

*

member's inability to engage in any

Catastrophic Incapacity

means

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

~

ill

combination of any two of the following body parts:

arm;

®

{ill

eye;

{Q

foot;

an

®

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.

*

*

*



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.

*

that

~

*

*

~

Vocational rehabilitation program

means

court-approved program

173

174

175

176

177

178

179

180

181

182

183

184

185

186

187

188

189

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)

*

~

*

represented employee, who has

An

employee;! except

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

the represented employee is confined in

~

L

2012 if

correctional

facility for conviction of

~

felony during any part of that

month unless the represented employee is participating in

~



EXPEDITED BILL

No.

18-12

190

191

192

193

194

195

196

197

198

199

200

201

202

203

204

205

206

207

208

209

210

211

212

213

214

215

216

vocational rehabilitation program.

correctional facility continues

Confinement in

f!

long as the individual is

under

f!

sentence of confmement 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.

*

(t)

*

*

The Disability Review Panel must recommend a finding of

catastrophic incapacity or total incapacity for

f!

represented employee,

or total incapacity for

~y

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.

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EXPEDITED BILL

No.

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218

219

220

221

222

223

224

225

226

227

228

229

230

231

232

233

234

235

236

237

238

239

240

241

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

incapacity if:

(l)

parti~l

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

lli!Y

f1

represented

employee who retires on

f1

service-connected disability retirement

with catastrophic incapacity an annual pension equal to 90% of

the represented employee's final earnings, less any reductions

WW\BILLS\I218 Disability Retirement-Eligibility And Benefits\Bi1l3.Doc

~



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

£1

represented

employee, for total incapacity equals 70% of the employee's final

earnings, less any reductions provided in section 33-134. The

County must

P£1Y

£1

represented employee who retires on

£1

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

£1

represented

employee, for partial incapacity equals 52Y:! % of the employee's

final earnings. The County must

P£1Y

£1

represented employee

who retires on

£1

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 Benefits\Bill 3.Doc

~

.



LEGISLATIVE 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

IMP ACT:

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 form 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\BlLLS\12l8 Disability Retirement-Eligibility And Benefits\LRR.Doc

@



OFFICE OF THE COUNTY

EXECUTIVE

ROl1{VILLE, MARYLAND 20850

Isiah Leggett

County Executive

MEMORANDUM

April 18,2012

TO:

Roger Berliner, President

Montgomery County Council

Isiab Leggett, County Executive

FROM:

SUBJECT:

Yr~

')

~

Legislation to Implement the March 29,2012, Service-Connected

Disability Retirement Interest Arbitration Award as Provided in Bill 45-10

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 staffwas 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 of Bill 45-1 0, 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) ofBi1145-10, 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

montgomerycountymd.gov/311

240-713-3556 TTY



In the Matter ofArbitration Between:

FRATERNAL ORDER OF POLICE

LODGE 35

and

Disability Retirement

Interest Arbitration

Walt De Treux, Esq., Arbitrator

MONTGOMERY COUNTY (MD)

GOVERNMENT

Hearing Date: 3/22/12

Decision Date:

3/29/12

Appearances:

For the FOP - Francis J. Collins, Esq .•

KAHN SMITH

&

COLLINS, P.A.

For the County - Sylvia Kinch, Esq.,

OFFICE OF COUNTYATTORNEY

Introduction and Statement of Relevant Facts

In July 2011, Montgomery County (Maryland) Council enacted Bill 45-10,

which amended the County's disability retirement system for certain employees,

including members of the police bargaining unit. Prior to enactment of the

legislation, police officers who suffered injuries on the job that left them unable to

perform the duties of a police officer were eligible for a disability retirement

pension benefit equal to 66-2/3% of their final earnings. Bill 45-10 created

categories of incapacity (partial or total incapacity) and levels of benefits for each

category. Pursuant to the legislation, an officer incurring partial incapacity

(inability to perform the duties of a police officer, but otherwise able to engage in

other employment) would be entitled to a disability retirement pension equal to 52­

1/2% of final earnings. A bargaining unit member who suffers total incapacity (an

inability to engage in any substantial employment) would be entitled to a disability

retirement pension equal to 70% of final earnings. Council also prohibited an

1



employee "who committed an offense that would justify termination for

misconduct" from receiving disability retirement benefits.

While the legislation expressed Council's desire that all Montgomery County

employees have a multi-tier disability retirement system, Council recognized that

disability benefits are a mandatory subject of bargaining.

It,

therefore, granted time

for the County Executive to negotiate with the police bargaining unit over an

appropriate multi-tier disability retirement system. If the parties failed to reach

agreement, the parties were directed by the legislation to submit the issue for

resolution through the applicable impasse procedures defined in the police labor

relations law.

The parties attempted to negotiate, together and with a mediator, an

appropriate multi-tier system. To that end, they agreed to a three-tier system and

benefit levels for each tier, as follows:

Partial incapacity - 60% of final earnings

Total incapacity - 66-2/3% of final earnings

Catastrophic incapacity - 90% of final earningsl

However, the parties were unable to agree to the County Executive's

proposed reduction in disability retirement benefits when an officer reaches Social

Security Normal Retirement Age (SSNRA). While both parties found overly broad

the Council's intent to strip an officer of disability retirement benefits for

Catastrophic incapacity has been defined as the loss of both arms, both eyes, both

feet, both hands, both legs, or a combination of any two of the following: arm, eye,

feet, hand, leg. The FOP proposal also included functional deafness, the definition of

which had not been fully resolved by the parties at the time of hearing.

1

2



dischargeable misconduct, they could not agree on the appropriate standard that

would disqualify a bargaining unit member from receiving benefits.

Pursuant to the impasse procedures provided in the police labor relations

law, an arbitrator was appointed to hear the dispute. The parties submitted last

best final offers to each other and the Arbitrator. On March 23, 2012, a hearing was

held in Gaithersburg, Maryland, during which time both parties had a full and fair

opportunity to present documentary and other evidence, examine and cross­

examine witnesses, and offer argument in support of their respective positions. The

parties rested their cases on the record, and the matter was submitted to the

Arbitrator for a decision.

Issue

Which of the parties' last best final offers is to be adopted?

Last Best Final Offers

As noted, the parties agreed on the appropriate tiers and benefit levels.

Accordingly, both parties' last best final offers include the follOwing tiers and benefit

levels: Partial incapacity - 60% of final earnings; Total incapacity - 66-2/3% of final

earnings; Catastrophic incapacity - 90% of final earnings.

The County included three other items in its last best final offer, summarized

as follows:

1) at normal social security retirement age, a reduction in the disability

retirement benefit to 1.65% of final earnings, multiplied by the greater of

3



25 and the number of years of service at disability, limited to 36, and

increased for the same COLAs that were applied to the pre-normal social

security retirement age disability benefit.;

2) the denial of disability retirement benefits to an employee who commits a

"significant criminal act" which leads to a conviction, provided the act

occurs after date of hire and before separation from service with the

County; and

3) for catastrophic incapacity, the calculation of final earnings as the

member's final earnings or the final earnings for a Police Officer III with

20 years of service, whichever is greater.

The FOP rejected the County proposal for a reduction in benefits at SSNRA.

While not expressly rejecting the final earnings calculation for a catastrophically

incapacitated employee, the FOP noted that it did not receive the County proposal

on this issue until the day of hearing and was not given sufficient time to review it

and/or incorporate it into its own proposal.

The FOP's final offer accepted the 60%-66-2/3%-90% tier levels and

benefits, as noted. It also included the following two items summarized below:

1) prohibiting an employee from receiving disability retirement benefits

while incarcerated; and

2) confirming that tentative agreements reached by the parties during

negotiations are part of the final award.

2

At hearing, the County did not contest that the tentative agreements are part of the

final Award, although it did not include such a statement in its final offer. It was

evident at hearing that both parties intended for the tentative agreements to be

2

4

@



Analysis and Decision

Due to the parties' dedicated and good faith efforts at reaching an agreement,

the dispute presented to this Arbitrator is effectively limited to two issues - the

reduction, if any, in disability retirement benefits when an officer reaches Social

Security Normal Retirement Age; and the standard by which an officer will be

ineligible for benefits because of criminal activity.

Pursuant to the parties' impasse procedure and BiIl45-10, the arbitrator is

required to select either party's last best final offer in its entirety. He is not free to

select specific provisions from each, or to craft compromises between the parties'

proposals. In short, an arbitrator must select either the County's last best final offer

or the FOP's last best final offer. In Bill 45-10, County Council specified the

standards by which the arbitrator must evaluate the parties' last best final offers. In

the legislation, the Council noted,

[the arbitrator] "must choose the final offer of either party after considering equally

the following factors:

(1) service-connected disability retirement systems for similar employees of other

public employers in the Washington Metropolitan Area and in Maryland;

(2) best practices for service-connected disability retirement systems for similar

employees in the United States;

(3) the interest and welfare of the public; and

(4) the long-term ability of the employer to finance a disability retirement system,

and the effect of the cost of the system on the normal standard of public services

provided by the employer.

binding on the parties regardless of which last best final offer is adopted in this

Award.

5

@



Reduction Qfbenefits at Social Security Normal Retirement Age

In Bill 45-10, County Council expressly stated in Section 33-131(4)(a),

"It is the policy of Montgomery County that all County employees should have a

multi-tier service-connected disability retirement system which includes a:

(1) partial incapacity service-connected disability retirement benefit for any injury

or illness that prevents an employee from continuing in the employee's current

position but does not prevent the employee from engaging in other substantial

gainful employment; and

(2) total incapacity service-connected disability retirement benefit for any injury or

illness that prevents an employee from engaging in any other substantial gainful

employment.

The Council did not specify why it determined such a policy was appropriate;

but in legislating a multi-tier system that provided a lesser benefit for partial

incapacity, the Council acknowledged its concern with a partially incapacitated

officer, able to engage in other employment, receiving the same benefit as a totally

incapaCitated officer, who is precluded from earning additional income.

It can be reasoned that the primary goal of Council in passing Bill 45-10 was

accomplished when the parties agreed to the partial (60%)-total (66-2/3%)­

catastrophic (90%) tier and benefit levels.

It

must be noted, however, that Bill 45­

10 also resulted in projected savings to the County (in the form of reduced

contributions) of approximately $1.3 million for FY2013. According to plan actuary

Douglas Rowe of Mercer, the parties' three-tier system provides for a savings of

$631,000.

34

Rowe also provided savings projections for non-union employees. Those figures

are not considered in this Award.

4

Joseph Duda, of Duda Actuarial Consulting, retained by the FOP, projected savings

of $771,000, an amount that he considered actuarially consistent with Rowe's

projections. Because Rowe also provided cost estimates for the County's last best

final offer and the competing actuaries have no substantial disagreement, this

Award adopts Rowe's projections throughout.

3

6

®



The County Executive deemed it necessary to present a proposal that roughly

matched the savings anticipated by Bill 45-10. Accordingly, it introduced the

concept of a reduction in disability benefits when an officer reached Social Security

Normal Retirement Age.

It

adopted a reduction to 1.65% of final earnings from a

provision in the normal service retirement system, which reduces the benefit of an

officer on service retirement to that amount when he/she reaches SSNRA. The

projected savings achieved by the multHier system with the SSNRA-triggered

reduction total $1.235 million in FY2013

5•

While the County's effort to maintain a certain level of savings is

understandable, Council did not specify in Bill 45-10 that the parties had to achieve

the level of savings generated by County Council's 52.5%-70% disability retirement

system. Rather, it instructed the parties to negotiate "an appropriate multi-tier

system" and mandated that the arbitrator apply four specific factors to his

evaluation of the parties' last best final offer. The County's proposal for a reduction

in disability retirement benefits at SSNRA does not withstand scrutiny under the

four factors provided by Bill 45-10.

The County could not identify any service-connected disability retirement

systems for similar employees of other public employers in the Washington

Metropolitan Area and in Maryland that provide for a reduction in disability benefits

at SSNRA. Both Director of Human Resources Joseph Adler and Plan Actuary Rowe

testified that they were not aware of any jurisdiction in Maryland that provided for

such a reduction in benefits. Rowe, who also found no such system in the Metro DC

figure includes the final earnings formula in the County's last best final offer

for an officer who has a catastrophic incapacity.

7

5

This



area, cited Frederick County, Maryland as a jurisdiction that converts a disability

retirement benefit to a normal service retirement benefit at SSNRA. But the County

is not seeking a conversion as exists in Frederick County; but rather, it is seeking a

reduction in disability retirement benefits at SSNRA. The systems do not compare.

Rowe noted that Montgomery County reduces a normal service retirement

benefit to 1.65% of final earnings at SSNRA. Bill 45-10 does not require this

Arbitrator to look within the County itself, but rather, at the surrounding

jurisdictions. Even if the County's own practice was taken into consideration, it

stands alone among surrounding jurisdictions in mandating such a reduction.

The second factor to be evaluated under Bill 45-10 is "best practices for

service-connected disability retirement systems for similar employees in the United

States." "Best practices" presumes that other jurisdictions in the United States have

adopted the provision in dispute and that it has gained some widespread

recognition or acceptance as an appropriate method to manage disability retirement

benefits. The County could not cite any jurisdiction in the United States that

includes such a SSNRA-triggered reduction provision in its disability retirement

system.

FOP

Actuary Duda had also never come across such a provision.

"The interest and welfare of the public" is the third factor to be examined.

The County did not offer testimony as to how the public interest and welfare is

improved or protected by reducing a disabled officer's retirement benefits at

SSNRA. FOP President Marc Zifcak offered that the public is better protected by an

officer who knows he/she will not suffer financially if he/she is injured on the job.

Zifcak theorized that the public couldn't afford to have an officer hesitate to act out

8



of concern for injury and any negative financial consequences that could result.

Neither parties' presentation persuasively established that the inclusion or absence

of a reduction provision would have any significant impact on the interest and

welfare of the public.

Finally, Bill 45-10 requires this Arbitrator to consider the long-term ability of

the County to finance a disability retirement system and the effect of the cost of the

system on public services. The parties' agreement on a multi-tier system of

incapacity and benefit levels results in considerable savings to the County, thereby

strengthening its ability to finance the disability system and freeing money to be

used for other public services. Certainly, the County Executive's proposal for a

reduction in benefits at SSNRA increases those savings. But it is an unconventional

and untried approach that does not share acceptance or recognition in the

Washington Metropolitan Area, in Maryland, or anywhere in the United States. And

it has not been demonstrated that it has any beneficial effect on the interest and

welfare of the public.

If the only focus of Bill 45-10 was to generate savings, Council could have

crafted a system that provided for even more drastic reductions in benefits either at

the time of disability or at SSNRA.

It

did not do so; rather it encouraged the parties

to negotiate an appropriate disability retirement system that mirrored the systems

in other jurisdictions, served the interest and welfare of the publiCI and provided

long-term financial stability to the system with a positive effect on other public

services.

9



The parties' agreement on a multi-tier system of incapacity and benefit levels

achieves these goals. The County's proposal to reduce benefits at SSNRA was solely

motivated by a desire to reach approximately the same level of savings as would be

realized under Bill 4S-10. Council did not require such a level of savings; and the

parties' agreement already produces substantial savings in FY2013 and for many

years to come.

The County's proposal for a reduction in benefits at SSNRA does not comport

with the factors to be considered under Bill4S-10. The parties' agreement on a

multi-tier system that provides for a 60% benefit for partial incapacity, 66-2/3% for

total incapacity, and 90% for catastrophic incapacity creates an appropriate

disability retirement system consistent with the policy goals of Bill4S-10.

Denial

of

benefits

{or criminal conduct

Bill4S-10 contains a provision denying disability retirement benefits to an

officer who commits an offense "that would justify termination for misconduct."

Both parties recognize that prohibition as overly broad, and neither could

adequately explain the Council's motivation for including such a provision in the

legislation.

The County asserted that officers charged with misconduct often file

disability claims, suggesting that those claims were suspect; but it acknowledged

that such claims had to be evaluated and found to have merit by a disability review

board. There was no evidence or allegation that the review board granted disability

retirement benefits to officers with meritless claims.

10



Nonetheless, Bill45-10's broad misconduct language compelled the parties

to craft alternatives. The County proposed in its last best final offer that officers

committing a "significant criminal act"6 resulting in a conviction be denied eligibility

for disability retirement benefits. The FOP's proposal requires the suspension of

benefits during any period of incarceration. Those proposals have to be evaluated

under the four factors enunciated in Bill 45-10.

There is no question that the County worked diligently and in good faith to

craft a proposal that addressed what it perceived as Council's concern. But

Lieutenant David Anderson admitted that the "significant criminal act" standard was

not adopted from other public employers in the Metro Washington Area or in

Maryland. Rather, the standard was the result of internal deliberations among

County and Police Department representatives.

The FOP proposal for suspension of benefits during incarceration did not

.specifically arise from surrounding jurisdictions, but it was adopted from Social

Security regulations. Code of Federal Regulations §404.468(a) provides,

"No monthly benefits shall be paid to any individual for any month any part of which

the individual is confined in a jail, prison, or other penal institution or correctional

facility for conviction of a felony. This rule applies to disability benefits ..."

In the absence of any evidence that other jurisdictions around Montgomery

County or elsewhere have adopted criminal act provisions in their disability

retirement systems, the Social Security standard, applicable throughout the United

6 The proposal defines "significant criminal act" as one resulting "in confinement of

at least 30 days and/or any type of probation of at least 60 days", excluding traffic

code violations.

11



States, stands as a "best practice" for handling the effects of a criminal conviction on

disability retirement benefits.

The County generally offered that the interest and welfare of the public is not

served by officers filing for disability retirement benefits prior to or after being

charged with a criminal act. The unstated implication was that the officers are

attempting to secure these benefits to ensure income in the face of likely

termination of employment. Yet the County admitted that it had no evidence as to

whether the alleged problem is widespread. It conceded that all disability claims

have to be vetted by the disability review board, and it acknowledged that an

investigation by the Inspector General did not uncover any systemic fraud.

The FOP asserted its position that the interest and welfare of the public is

best served by officers who, when incurring injuries in the line of duty, are

financially protected from the effects of those injuries. It labeled the County

proposal as "draconian", and it cited a hypothetical situation of a 25-year old officer,

injured in the line of duty, who loses a lifetime of benefits because he engaged in

some minor criminal conduct that resulted in 60 days probation. The FOP argues

that the officer pays his debt to society by serving the 60 days probation, but pays a

much greater penalty imposed by the County when he loses benefits, to which he is

otherwise entitled, for the remainder of his life. Such a disproportionate penalty

serves no public interest.

The FOP argument against the County proposal is persuasive, and the FOP

proposal, borrowed from federal regulations, better serves the public interest and

welfare.

12



The parties agree that incidents of officers engaging in criminal conduct that

result in incarceration or probation are rare. Inclusion of either party's proposal

will have no significant effect on the long-term ability of the County to finance the

disability retirement system.

Considering that no surrounding jurisdiction includes a criminal conviction

provision in its disability retirement system, that the FOP proposal adopts the "best

practices" on criminal conviction from Social Security regulations, that the FOP

proposal better serves the public interest and welfare, and that the parties'

proposals do not impact the financial stability of the County's disability retirement

system, I find that only the FOP proposal comports with the factors enunciated in

Bill 45-10.

In conclusion, applying the factors in Bill 45-10 as explained above, I find that

the FOP last best final offer creates an appropriate multi-tier disability retirement

system that achieves the goals set forth by County Council.

13



Award

The FOP last best final offer is adopted. The County Executive is directed to

submit this Award to Council pursuant to

Bill

45-10, Section 33-131(4)(d) no later

than April 1, 2011.

14



OFFICE OF THE COUNTY EXECUTIVE

ROCKVILLE. MARYLAND 20850

Isiah 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 COWIty, 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{311

240-773-3556 TTY

@



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

Bill xx-12 - Service Connected Disability 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 of Human Resources

Alex Espinosa, Office ofManagement and Budget

Naeem Mia, Office ofMauagement and Budget



Fiscal Impact Statement

Bill, Service Connected Disability Retirement

1. Legislative Summary

As

provided in Bill 45-1 0, 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 ofthe arbitration award on March 29. The bill establishes a multi-tiered disability

retirement system under certain criteria of either the greater ofthe accrued benefit or 60

percent, 66

2/3

percent, or 90 percent of final earnings, depending on 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 ofthe Employees Retirement

System.

2.

An

estimate of changes in County revenues and expenditures regardless of whether the

revenues or expenditures are assumed in the reconunended or approved budget. Includes

source of infonnation, assumptions, and methodologies used.

.

Mercer, the County's retirement plan actuary, estimates a minimum annual cost of

$852,000 relative to the proposed FY13 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 ofdisablements 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 if the bill authorizes future

spending.

Not applicable.

1



6. An estimate ofthe 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 sta:ff'responsibilities would affect other duties.

Not applicable.

8.

An

estimate of costs when an additional appropriation is needed.

An additional appropriation ofat 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 fiscal 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 Human Resources

Alex Espinosa, PSP Manager, Office of Management and Budget

Oennifi

'A.

Hughes, Dlf tor

Office of Management and Budget

Date

2



Economic Impact Statement

Council Bill XX-12 (amendment to Bill 45-10)

-Service Connected Disability Retirement

Background:

As provided in Bill 45-1 0, 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 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 1 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 concun-ed with this analysis: David Platt and Mike

Coveyou, Finance.

~each,

Director

Department of Finance

~L

-uL.

t.f-if-

/ L

Date



Douglas Rowe. FSA, EA, MAAA

Principal

M

rvlERCER

One South St., Suite 1001

Baltimore, MO 21202

410 347 2806 Fax 410 727 3347

[email protected]

WWW.mercef.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.

I

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

u

cel1ain 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

213%

benefit

The changes reflected in this letter are based on our understanding of the set of proposed plan

changes you provided.

CONSULTING. OUTSOURCING. INVESTMENTS.

. " . MARSH

&

McLENNAN

~

COMPANIES



M

IVIERCER

Page 2

April

4.

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,

Le. in the FY2013 contribution, as the other disability changes seems appropriate.

I

Description of Proposed Plan Provision Changes

Following is the description of the proposed plan changes you 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

"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

"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

....", COMPANIES



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

213%

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



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:

Increase/(Decrease) in

Union

Non-union

Total

$5,653,000

$281,000

$661,000

Accrued Liability

$5,566,000

$277,000

$652,000

$87.000

$3,000

$9,000

Normal Cost

FY2013 Contribution

"'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

~

$614,000).

Scenario 2:

Increase/(Decrease) in

Union

Non-union

Total

$5,747,000

$286,000·

$672,000

Accrued Liability

$5,657,000

$282,000

$663.000

$90,000

$3,000

$9,000

Normal Cost

FY2013 Contribution

"'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).

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.

~

MARSH

&

McLENNAN

...,." COMPANIES



M

MERCER

Page 5

April 4, 2012

Mr. Joseph Adler

Montgomery County Government

Additionally, in the short term, the more generous COLAs available for service retirement benefits

for service prior to June

3D, 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 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

benefiHelated 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



M

MERCER

Page 6

April 4. 2012

Mr. Joseph Adler

Montgomery County Government

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

\'II.....

COMPANIES



M

MERCER

Pagel

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

use~

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

ate

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

IIff""""JI'

COMPANIES



M

MERCER

PageS

April

4.

2012

Mr. Joseph Adler

Montgomery County Govemment

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~'~AAA'EA

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.

\\waswpls01ldsta3\db\clilmgewas\20121specla! swdieslfop disability studylmgeunlon Ibfo

U-evised

4 42012.doc

. . MARSH

&

McLENNAN

1iIiI---.

COMPANIES



oouglas Rowe,

FSA,

EA, MAAA

Principal

M

MERCER

One South St. Suite 1001

Baltimore, MO 21202

4103472606 Fax4107273347

[email protected]

www.mercer.com

Via Electronic Mall

Mr. Joseph Adler

Director of Office of Human Resources

Montgomery County Government

101 Monroe Street, Sl3venth 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 "functional 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 reflected 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.

. . MARSH & McLENNAN

CONSULTING. OUTSOURCING. INVESTMENTS.

~COMPANIES

®



M

MERCER

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 additional scenarios ("Scenario 2 and Scenario

3'1,

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

"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 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

&

McLENNAN

l1li"""11'

COMPANIES



rvlERCER

Page 3

April 9. 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 tl)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

2/3%

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%

GroupE

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

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

if

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.

IIf9'1'

~

MARSH

&

McLENNAN

COMPANIES



M

MERCER

Page 4

April9,2012

Mr. Joseph Adler

Montgomery County Government

Base Scenario

Group A

Increasel(Oecrease) 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

$1

$1,601,000

$93,000

$201

Group H

Increasel(Oecrease) in

Union

Non-union

Total

Accrued liability

Normal Cost

FY2013 Contribution

$200,000

$8,000

$21.000

$0

$0

$0

$200,000

$8,000

$21,000

All groups A, E, H

Increase/(Oecrease) in

Union

Non-union

Total

Accrued liability

Normal Cost

FY2013 Contribution

$1,681.000

$96,000

$209,000

$269,000

$11,000

$29,000

$1.950,000

$107,000

$238,000

. . . . MARSH &McLENNAN

~

COMPANIES



M

MERCER

Page 5

April 9, 2012

Mr. Joseph Adler

Montgomery County Government

Scenario 2

Group A

Increasel{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

Increasel(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

Increase/(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

&

McLENNAN

~.,

COMPANIES



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MERCER

Page 6

Aprl19,2012

Mr. Joseph Adler

Montgomery County Govemment

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

Increasef(Decrease) in

Union

Non-union

Total

Accrued Liability

Normal Cost

FY20 13 Contribution

$1,604,000

$96,000

$204,000

$138,000

$6,000

$15,000

$1.742,000

$102,000

$219,000

Group H

Increasel(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/(Decrease) in

Union

Non-union

Total

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

Totallncrease from Base Scenario

Increase/(Decrease} in

Union

Non-union

Total

Accrued Liability

Normal Cost

FY2013 Contribution

$201,000

$11,000

$24,000

$82,000

$3,000

$9,000

$283,000

$14,000

$33,000

. . . . MARSH

&

McLENNAN

..

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lVlERCER

Page 7

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 GASS 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.

~

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&

McLENNAN

~COMPANIES



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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, 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

n~xt

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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&

McLENNAN

~~

COMPANIES



M

IVIERCER

Page 9

April9,2012

Mr.

Joseph

Adler

Montgomel)' 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 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 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 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.

. . MARSH

&

McLENNAN

1fIIYJ'

COMPANIES



M

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.

~

MARSH&McLENNAN

..-aJl

COMPANIES

®



M

MERCER

Page 11

Apri19,2012

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

~R:a,~

MAM, 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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. . . . ,MARSH

&

McLENNAN

~COMPANIES

®



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

injUrY or illness thaLPLevents an employee from continlling in the

employee's current position but does not prevent the e1illlli?yee from

s;ngaging in other substantial gainful employment: and

ill

total incapac:ity service-connected disability retirement benefit for any

injury or illness that prevents an employee from engaging in anv other

~antial

gainful employment.

ill

!£l

It

is also the policy of the County that disability benefits are a mandatory subject

of collective

barg~ining

with each appropriate certified employeerepresentative.

Notwithstandil1 g any County law to the contrary, the County Execlltive may

separately negotiate the terms of an appropriate multi-tier service-connected

disability retirement system with the certified employee representative for the

police bargail1ing unit and the certified representative for the OPT andSJ:"T

bargaining

unit~,

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 Counjy) police labor relati()ns . law @d the County

collective bargaining law as a separate matter, not part of or linked toany other

collective bargaining procedure. The impasse neutral for the police bargaining

unit and the mediator/arbitrator for the OPT and SLT bCirgaining units must

choose the final offer of either party after considering e9.lliill.y the following

factors:

ill

service-connected disability retirement systems forsimilar employees of

other public employers in the Washington Metropolitan Area and in

Maryland;

best practices for service-connected disability retirement systems for

similar employees in the United States;



ill

the interest and welfare of the public: and

(il

the long-term ability of the employer to finance a disability retirement

system. and the effect of the cost of the system on the normal standard of

p,gblic

service~

provided by the employer:

un

The Executive must submit the results of a;tly collective bargaining process

regarding this issue to the Council for legislative action not

2012.

lat~than

April 1,

2



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Page 1 of2

Section 3-7-28. - Service-connected disability.

(a)

Any member who in the discharge of his official duties has become totally disabled as a

result of an accident or personal injury on or before June 3D, 1981, shall receive an annual

retirement allowance, payable monthly, equaling sixty-six and two-thirds percent (662/3%) of

the salary that would have been received had no injury occurred and the performance of

duty had continued. Such pension and benefits shall continue during the existence of such

total disability, or until such time as eligibility is reached for retirement pursuant to Section 3­

7-26(a).

Any member who in the discharge of his official duties has become totally disabled as a

result of an accident or personal injury on or subsequent to July 1, 1981, shall receive an

annual retirement allowance, payable monthly, equaling sixty-six and two-thirds percent

(662/3) of the salary the member received on the date of accident or personal injury subject

to the provisions of Section 3-7-37. Such allowance shall continue during the existence of

such total disability, or until such time as eligibility is reached for retirement pursuant to

Section 3-7-26(b)(2).

The amount of compensation awarded,under the Virginia Workers' Compensation Act ("the

Act") to such members for temporary total or partial incapacity, including any awards of cost­

of-living increases under the Act, shall be deducted from such retirement allowance.

Whenever the member is no longer entitled to receive payments for temporary total or partial

incapacity under the Act because of the limits in the Act as to the total amount of such

compensation or as to the period of time that the member is entitled to receive such

compensation, such payments shall no longer be used to reduce the monthly retirement

allowance and, accordingly, subsequent monthly payments of the allowance shall be

determined as if the original allowance had been computed without reduction for such

payments.

Any member who applies for a service-connected disability retirement and an allowance

pursuant to Subsection (a) or (b) of this Section, or who applies pursuant to Section 3-7-29,

and who receives the allowance prescribed by this Section as a result thereof, on or after the

effective date of this Subsection [July 1, 1988], shall receive the allowance so provided

during the existence of such disability, until the total membership service credit period equals

twenty-five (25) years, whereafter said allowance shall be reduced to sixty percent (60%) of

the salary that would have been received had no injury occurred and the performance of

duty continued.

With respect to all retirements after the effective date of this Subsection [January 11, 1993]

pursuant to this Section or as a result of an application pursuant to Section 3-7-29 as a result

of which the member receives the allowance provided by this Section, if a member receives

some or all of his compensation for temporary total or partial incapacity under the Act in the

form of a lump sum payment, he shall receive no monthly retirement allowance otherwise

payable under this Section until such time as the amounts he would have received equal the

amount of his lump sum benefit under the Act; provided, however, neither a lump sum

payment or any portion thereof representing compensation for permanent total or partial loss

or disfigurement under the Act nor a lump sum payment or a portion thereof representing

compensation for periods of temporary total or partial incapacity which occurred prior to the

effective date of the member's retirement under this Section shall be offset against the

member's allowance under this Section; and provided further that in the event that the

member receives a lump sum settlement of benefits that he is or may be entitled to in the

(b)

(c)

(d)

(e)

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future under the Act, and said settlement does not specify how much of the sum represents

settlement of his entitlement to temporary total or partial incapacity, as opposed to other

benefits, the Board shall determine the portion of such sum which in its judgment represents

compensation for such benefits. (20-81-3; 8-82-3; 4-83-3; 36.:88-3; 13-92-3; 1-93-3.)

Section 3-7-29. - Partial service-connected disability.

(a)

For purposes of this Article, "total disability" shall be defined as the inability of the member to

reasonably perform his or her duties as a pOlice officer. "Partial disability" shall be defined as

the inability of the member to perform some part of the duties of a police officer, such as in

administrative or desk assignments.

Members granted pension and benefits for partial disability shall be subject to recall to active

service by the Board when police officer positions are available in the Police Department that

they are capable of performing, as determined by the Chief of Police. If so recalled, all

pension and benefits for partial disability shall terminate from and after the date of such

recall.

Any member becoming partially disabled in the manner provided in this Section, who shall

remain in the Police Department in a police officer position which he or she is capable of

performing, shall not receive pension and benefits until such service credit is acquired as

would otherwise be required for service retirement.

If the Chief of Police determines that there is no suitable police officer position available for a

partially disabled member, such member shall then be treated as totally disabled under the

provisions of this Article from and after the date of his or her separation from employment

with the Police Department.

The surviving spouses and dependants of all members who have been retired before and of

those who are retired on or after July 7, 2003. on account of service-connected partial

disability shall be entitled to benefits under Section 3-7-41. (20-81-3; 33-03-3).

(b)

(c)

(d)

(e)

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Sec. 1.431A. - Disability benefits.

The Plan shall pay disability benefits determined in accordance with the following provisions:

(a)

Ordinary Disability.

If a participant reaches a termination date by reason of total and

permanent disability, the participant shall be entitled to receive a monthly disability

benefit equal to the greater of the amount determined in accordance with paragraph

(1) or paragraph (2), as follows:

(1)

If the participant has completed at least five years of creditable service, the

monthly benefit payable pursuant to this paragraph (1) shall be 20 percent of

the participant's average compensation.

If the participant has completed at least five years of creditable service, the

monthly benefit payable pursuant to this paragraph (2) shall be the participant's

accrued benefit (based upon the participant's actual years of creditable service

and average compensation at his or her termination of employment), without

actuarial reduction and, notwithstanding the provisions of subsection (c) of this

section, without reduction for any benefits payable under the Workers'

Compensation Law of Maryland.

Except as provided in paragraphs (2) and (3) of this subsection, a participant

(regardless of his or her length of service) who terminates employment by

reason of total and permanent disability, incurred as a result of an accident or

injury which has been sustained as an active covered employee and which has

been ruled compensable under the Workers' Compensation Law of Maryland,

shall be entitled to receive a monthly benefit equal to the greater of:

(i)

(ii)

The benefit determined pursuant to (a) above; or

The lesser of:

a.

A monthly amount which, when combined with any Social

Security disability benefits the participant is entitled to receive,

equals 100 percent of his or her compensation determined, as of

the onset of the participant's disability; or

(2)

(b)

Une of Duty Disability.

(1)

b.

(2)

662/3

percent of the participant's compensation.

Except as provided in paragraph (3) of this subsection, a participant, regardless

of his or her length of service, who is a Firefighter who terminates employment

after December 31, 1997 or a Police Officer who terminates employment after

March 31, 1998 by reason of a line of duty disability shall be entitled to receive:

(i)

If the line of duty disability is a catastrophic disability, as defined in

subparagraph (iv) below, a monthly benefit equal to

662/3

percent of the

participant's compensation; or

If the line of duty disability is a noncatastrophic disability, as defined in

subparagraph (v) of this paragraph, a monthly benefit equal to 50

percent of the participant's compensation.

(ii)

(3)

A participant who is receiving a monthly benefit pursuant to paragraph (1) of

this subsection may make a one-time irrevocable election to cease his or her

receipt of benefits under paragraph (1) of this subsection in exchange for

benefits under paragraph (2)(ii) of this subsection. Such election shall be made

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of

4

between the effective date of this amendment and November

30, 2000

and

shall take effect on January

1, 2001.

(4)

In paragraphs (2) and (3) of this subsection the following terms have the

meanings indicated:

(i)

Line

of

duty disability

means a total and permanent disability which, as

determined in accordance with rules established by the Committee, is

incurred as a result of an accident or injury which has been sustained as

a result of service as an active covered employee and which has been

ruled compensable under the Workers' Compensation Law of Maryland.

Catastrophic disability

means a line of duty disability:

a.

b.

By reason of which the participant will be permanently prevented

from engaging in any substantial gainful employment; or

Which severely limits one or more major life activities. Substantial

gainful employment means the ability to perform a moderate

amount of work with reasonable regularity, without reference to

the type of work performed by the participant before his or her

termination date. Major life activities include caring for one's self,

walking, seeing, hearing, speaking, breathing or learning.

(ii)

(iii)

(c)

Noncatastrophic disability

means a line of duty disability which is not a

catastrophic disability.

Payments Considered in the Nature

of

Workers' Compensation Payments.

Any

payments made to Police and Fire employees for injuries received in the line of duty

pursuant to any retirement disability provisions of this plan shall be considered to be in

the nature of Worker's Compensation payments made pursuant to Title

9

of the Labor

and Employment Article of the Annotated Code of Maryland.

Adjustments to Compensation.

For purposes of (b) above, "compensation" includes

adjustments to the legislated base annual salary for employees in the same position

classification as the participant at the time of the onset of the participant's disability

through the date the participant's disability benefits commence. In addition, such

participant shall be entitled to receive individual health insurance coverage under the

health plan in effect for covered employees as of the participant's termination date (or

if the plan is no longer offered by the County, coverage under the most comparable

health plan offered by the County). The premiums for such health insurance coverage

will be paid by the County.

General Provisions Relating

to

Disability.

(1)

(d)

(e)

Commencement

of

disability benefits.

Disability benefits shall commence on

the first day of the month coincident with or otherwise next following the

determination of disability by the County; provided, however, that benefits

payable pursuant to this section shall be reduced by any benefits payable from

workers' compensation.

Forms

of

benefit.

The benefits payable pursuant to this section shall be payable

in the normal form provided by section 1.428A, unless an optional form of

payment has been elected pursuant to section

1.442A.

Definition.

(i)

Total and permanent disability shall mean a medically determinable

physical or mental impairment which can be expected to be permanent

or result in death, and by reason of which the participant will be

(2)

(3)

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prevented from performing the usual duties of his or her position with the

County as required by the County Code.

(ii)

(iii)

Such total and permanent disability must be evidenced by a certificate of

a physician selected or approved by the County.

However, total and permanent disability shall not include any injury or

disease which:

a.

b.

Resulted from or consists of chronic alcoholism or addiction to

narcotics;

Was contracted, suffered or incurred while the participant was

engaged in, or resulted from his or her having engaged in, a

criminal enterprise;

Was intentionally self-inflicted; or

Arose as a result of willful negligence on the part of the

participant.

c.

d.

(4)

Continuing disability.

(i)

Until a participant who has reached a termination date by reason of

disability attains his or her normal retirement date, the continuation of

the participant's right to receive disability benefits shall depend on the

participant's continued survival, and the case shall be subject to periodic

review in accordance with rules established by the County to determine

the participant's employment status, including the requirement that the

participant furnish to the County a copy of his or her Federal income tax

return each year.

In the event a disabled participant ceases to submit to such review, prior

to his or her normal retirement date, the disability benefits payable

pursuant to this section shall cease.

Except as provided in subparagraph (iv) of this paragraph, if, during a

calendar year, the amount of a participant's earned income, worker's

compensation benefits, and disability benefits paid to the participant

pursuant to this section for such year exceed the participant's

annualized average compensation at his or her termination date plus

$3,000.00 (adjusted for cll increases), effective as of the first day of the

next following plan year, the disability benefit payable under the plan

shall be reduced, dollar for dollar, to the extent of the excess.

Subparagraph

(iii)

of this paragraph does not apply to participants who

retire pursuant to the provisions of subsection (b)(2) of this section.

(ii)

(iii)

(iv)

(5)

Death of disabled parlicipant.

In the event of the death of a disabled participant,

no benefits with respect to the participant shall be payable except as otherwise

provided in sections 1.439A and 1.440A.

(6)

Termination of employment after normal retirement date.

Notwithstanding any

of the foregoing provisions, if a participant terminates employment with the

County on a date at which he or she would be entitled to benefits pursuant to

section 1.428A, the participant shall be deemed to have elected retirement and

shall receive the benefits provided under section 1

A.28A,

as the case may be;

provided, however, that if the participant qualifies for benefits payable pursuant

to this section 1.431A the participant may elect to receive disability benefits

under this section 1.431A in lieu of benefits under section 1.428A.

(CB

83,1995:

CB 60.

1997,

CB

79. 1997:

C.B.

21.

2000, C.B.

10.

2001. C.B.

7,

2004.

§ 2;

CB

22.2008.

§ /)

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Baltimore County Police & Fire Disability

§

5-1-226. SAME--POLICE AND FIRE DEPARTMENTS.

Upon retirement for accidental disability, such member shall receive an accidental disability

retirement allowance which shall be as follows:

(1)

(i)

Dismemberment or paralysis.

Member .shall be eligible to receive an accidental disability

allowance, regardless of age, if the member has sustained any of the losses listed in the schedule

below and which loss has been determined to be the direct result of bodily injury arising through

an accident, independent of all other causes, occurring while in the actual performance of duty

with the county at a definite time and place, without willful negligence on the part of the

member. The accidental disability allowance under this section shall be an amount equal to

seventy-five (75) percent of the member's average final compensation.

(ii) Schedule of losses:

1. Both hands or both feet;

2. One hand and one foot;

3. One hand and the sight of one eye;

4. One foot and sight of one eye;

5. Sight of both eyes;

6. Paralysis (para or quadriplegia);

with respect to a hand or foot, "loss" means dismemberment by severance through or above the

wrist or ankle joint. "Loss" also means partial dismemberment of a hand or foot that results in

the loss of all functional use of the partially dismembered hand or foot. With respect to eyes,

"loss of sight of one eye" shall mean central visual acuity of twenty two-hundredths (20/200) or

less in one eye with the use of correcting lenses, or visual acuity of greater than twenty two­

hundredths (20/200) if accompanied by a limitation in the field of vision such that the widest

diameter of the visual field subtends an angle no greater than twenty (20) degrees. "Loss of sight

of both eyes" shall mean central acuity of twenty two-hundredths (20/200) or less in the better

eye with the use of correcting lenses, or visual acuity greater than twenty two-hundredths

(20/200) if accompanied by a limitation in the field of vision such that the widest diameter of the

visual field subtends an angle no greater than twenty (20) degrees.

(2) (i)

Accidental disability

-

schedule

0/

impairments.

A member shall be eligible to receive a

full accidental disability allowance, regardless of age, if the member has sustained an impairment

or impairments to the extent listed below under "schedule of impairments" as a direct result of

the actual performance of duties with the county and which has permanently incapacitated the

member for the further performance of the duties of the member's job classification. The full

accidental disability allowance under this paragraph shall be an amount equal to sixty-six and

two-thirds (66 2/3) percent of the member's average final compensation.

(ii)

Schedule a/impairments:

A seventy-five (75) percent anatomical loss of the use of the

impairments listed below or a fifty (50) percent or more anatomical loss of each of two (2) or



more of the impairments below; or, except as to Group 3 members, a one hundred (100) percent

or more anatomical loss of the use of any combination of the impairments listed below, if the

loss is caused by the same accident or incident, and, as a result of the loss, the member's

employment is involuntarily terminated:

1. Speech;

2. Sight;

3. Neck;

4. Back;

5. Vital bodily organ;

6. A part of the central nervous system;

7. Arm;

8. Hip, leg, or lower extremity;

9. Shoulder;

10. Hearing;

11. Mentally incapacitated whereby a member applies for and is granted a disability benefit

under the federal old-age survivor's and disability insurance act.

(iii) The percentage of anatomical loss shall be determined in accordance with the American

Medical Association guides to evaluation of permanent impairment, such determination shall

include information about function and range of motion.

(3) Accidental disability.

A member shall be eligible to receive an accidental disability

allowance, regardless of age, if the member has sustained an impairment as a direct result of the

actual performance of duties with the county and which has permanently incapacitated the

member for the further performance of the duties of the member's job classification but does not

reach the extent of incapacity as found in paragraphs

(1)

and (2) of this section. For pay

schedules IV, V, VII, and VIII, the accidental disability allowance under this section shall be an

amount equal to one-fortieth (1140) of the member's average final compensation multiplied by

the number of years of creditable service not in excess of twenty (20) and one-fiftieth (1/50) of

the member's average final compensation multiplied by the number of years of creditable service

in excess of twenty (20). The minimum retirement allowance shall be equal to fifty (50) percent

of the member's average final compensation. The retirement allowance for a Group 3 member

shall be equal to fifty (50) percent of the member's average final compensation but not less than

the normal service retirement benefit that the member would have been entitled to on the date of

retirement.

(1988 Code,

§

23-57.1) (Bill No. 84-94,

§

2, 7-1-1994; Bill No. 91-95,

§

1, 7-1-1995; Bill No.

82-01, § 1, 10-5-2001; Bill No. 32-03, § 1,7-1-2004; Bill No. 30-10, § 2, 7-1-2010)

2



District of Columbia Police

&

Fire Disability

DC ST

§

5-710

Formerly cited as DC ST 1981

§

4-616

District of Columbia Official Code 2001 Edition Currentness

Division

I.

Government of District.

Title 5. Police, Firefighters, Medical Examiner, and Forensic Sciences.

I<.ri1Chapter 7. Police and Firefighters Retirement and Disability.

I(,rilSubchapter

1.

Retirement and Disability, 1916 .

• §

5-710. Retirement for disability--Incurred or aggravated in performance of duty.

(a) Except as provided in subsections (e) and (e-1) of this section, whenever any member is injured or

contracts a disease in the performance of duty or such injury or disease is aggravated by such duty at

any time after appOintment and such injury or disease or aggravation permanently disables him for

the performance of duty, he shall, upon retirement for such disability, receive an annuity computed at

the rate of 2 1/2 of his average pay for each year or portion thereof of his service; provided, that such

annuity shall not exceed 70% of his average pay, nor shall it be less than 662/3 of his average pay.

(b) In any case involving a member who is an officer or member of the United States Park Police

force, the United States Secret Service Uniformed Division, or the United States Secret Service

Division, in which the proximate cause of injury incurred or disease contracted by the member is

doubtful, or is shown to be other than the performance of duty, and such injury or disease is shown to

have been aggravated by the performance of duty to such an extent that the member is permanently

disabled for the performance of duty, such disability shall be construed to have been incurred in the

performance of duty. The member shall, upon retirement for such disability, receive an annuity

computed at the rate of 2 1/2 of his average pay for each year or portion thereof of his service;

provided, that such annuity shall not exceed 70% of his average pay, nor shall it be less than 66 2/3

of his average pay.

(c) A member shall be retired under this section only upon the recommendation of the Board of Police

and Fire Surgeons and the concurrence therein by the Mayor, except that in any case in which a

member seeks his own retirement under this section, he shall, in the absence of such

recommendation, provide the necessary evidence to form the basis for the approval of such retirement

by the Mayor.

(d)(1) A member who is an officer or member of the Metropolitan Police force or the Fire Department

of the District of Columbia may not retire and receive an annuity under this section on the basis of the

aggravation in the performance of duty of an injury incurred or a disease contracted in the

performance of duty unless:

(A) In the case of the aggravation of a disease, the disease was reported to the Board of Police and

Fire Surgeons within 30 days after the disease was first diagnosed; or

(B) In the case of the aggravation of an injury, the injury was reported to the Board of Police and Fire

Surgeons within 7 days after the injury was incurred or, if the member was unable (as determined by

such Board) as a result of the injury to report the injury within such 7-day period, within 7 days after

the member became able (as determined by such Board) to report the injury.

(2) The burden of establishing inability to report an injury in accordance with subparagraph (6) of

paragraph (1) of this subsection within 7 days after such injury was incurred and of establishing that

such injury was reported within 7 days after the end of such inability shall be on the member claiming

such inability. Any report under this subsection shall include adequate medical documentation.

Nothing in this subsection shall be deemed to alter or affect any administrative regulation or

requirement of the Metropolitan Police force or the Fire Department of the District of Columbia with



respect to the reporting of an injury incurred or aggravated, or any disease contracted or aggravated,

in the performance of duty.

(e)(l) Whenever any member who is an officer or member of the Metropolitan Police force or the Fire

Department of the District of Columbia and who first becomes such a member after the end of the 90­

day period beginning on November 17, 1979, is injured or contracts a disease in the performance of

duty or such injury or disease is aggravated by such duty at any time after appointment and such

injury or disease or aggravation permanently disables him for the performance of duty, he shall upon

retirement for such disability, receive an annuity computed in accordance with paragraph (2) of this

subsection.

(2)(A) In the case of any member who retires under this subsection or subsection (b) of

§

4-615, the

Board of Police and Fire Surgeons shall determine, within a reasonable time and in accordance with

regulations which the Mayor shall promulgate, the percentage of impairment for such member and

shall report such percentage of impairment to the Police and Firemen's Retirement and Relief Board.

(B) In the case of any member described in subparagraph (A) of this paragraph, the Police and

Firemen's Retirement and Relief Board shall determine within a reasonable time the percentage of

disability for such member giving due regard to:

(i) The nature of the injury or disease;

(ii)

The percentage of impairment reported pursuant to subparagraph (A) of this paragraph;

(iii) The position in the Metropolitan Police force or the Fire Department of the District of Columbia

held by the member immediately prior to his retirement;

(iv) The age and years of service of the member; and

(v) Any other factors or circumstances which may affect the capacity of the member to earn wages or

engage in gainful activity in his disabled condition, including the effect of the disability as it may

naturally extend into the future.

(C)

The percentage of impairment or the percentage of disability for a member to whom this

subsection applies may be redetermined at any time prior to the time such member reaches the age

of 50 and his annuity shall be adjusted accordingly.

(D) The annuity of a member who is retired under this subsection shall be 70% of his basic salary at

the time of retirement multiplied by the percentage of disability for such member as determined in

accordance with subparagraph (B) of this paragraph, except that such annuity shall not be less than

40% of his basic salary at the time of retirement.

(E) For purposes of this subsection:

(i) The term "impairment" means any anatomic or functional abnormality or loss existing after

maximal medical rehabilitation has been achieved.

(ii) The term "disability" means any actual or presumed reduction in or absence of ability to engage in

gainful activity which is caused, in whole or in part, by an impairment.

(e-1) Whenever the Board of Police and Fire Surgeons receives a recommendation from the Director

for a disability retirement of a Metropolitan Police Department or Fire and Emergency Medical Services

Department member pursuant to Chapter 6A of this title, the Board of Police and Fire Surgeons shall

make a disability assessment and, if the member is unable to perform the full range of duties, shall

retire the member as disabled regardless of whether the member is performing useful and efficient

services that are less than the full range of duties. The member shall be retired on an annuity

determined in accordance with subsection (e)(2) of this section.

2



(f) Not later than 90 days after November 17, 1979, the Board of Police and Fire Surgeons shall

submit to the Mayor recommendations for regulations to establish specific criteria for determining

whether an injury was incurred, or a disease was contracted, in the performance of duty and whether

an injury or disease was aggravated in the performance of duty. The Mayor shall promulgate

regulations establishing such criteria in a timely manner based on the recommendations of the Board.

(g)(I) In making determinations under this section and under

§

4-615, the Board of Police and Fire

Surgeons and the Police and Firemen's Retirement and Relief Board shall make full use of the medical

resources in the District of Columbia and shall make the widest practical use of the medical expertise

available to them consistent with fair and even administration of Chapter 7 of Title

1.

(2) Not later than 90 days after November 17, 1979, the Board of Police and Fire Surgeons and the

Police and Firemen's Retirement and Relief Board shall each submit to the Mayor recommendations for

regulations to carry out the requirements of paragraph (1) of this subsection. The Mayor shall, in a

timely manner and based on the recommendations of such Boards, promulgate regulations to carry

out the requirements of such paragraph.

(3) Failure to promulgate such regulations, or failure to comply with such regulations, shall not

invalidate any decision of the Mayor or the Police and Firemen's Retirement and Relief Board with

respect to the retirement of any individual.

3



Anne Arundel Police Disability

§

5-5-205. f)isability pensions.

(a) Limitation on "total and permanent disability". In this section, "total and permanent

disability" does not include disability resulting from or consisting of the participant currently

engaging in the illegal use of drugs or narcotics; a willful effort on the participant's part to bring

about injury or illness to the participant or another person, while the participant is sane or insane;

the participant engaging in any illegal or criminal enterprise or activity; injuries incurred on the

job while under the influence of alcohol; or injuries incurred as a result of military service, other

than as set forth in subsection (d)(4).

(b) Scope of "total and permanent disability". A participant has a total and permanent

disability if the Personnel Officer determines, on the basis of a medical examination by one or

more physicians selected by the Personnel Officer, that the participant is wholly and permanently

prevented as a result of bodily injury or disease from engaging in any occupation or employment

for remuneration or profit or continuing as an employee in the participant's regular assignment or

in some other assignment within the Police Department.

(c) Eligibility. A participant is eligible for a disability retirement pension under this title on

the first day of the month that the participant is determined to have a total and permanent

disability and was making employee contributions to the plan immediately prior to the date of

disability. A participant is not eligible to commence receiving a disability retirement pension on

and after the participant's normal retirement date unless the disability is the result of a bodily

injury or disease arising out of and occurring in the course ofthe participant's active

performance of duties.

(d)

Annual disability retirement pension.

(1) The annual amount of a disability retirement pension payable to each eligible

. participant shall be determined as provided in this subsection.

(2) If a participant has a total and permanent disability that is the result of bodily injury

or disease arising out of and occurring in the course of the participant's employment, the

participant is entitled to receive an annual disability retirement pension equal to the greater ofthe

participant's accrued benefit or

662/3%

of:

(i)

the participant's final average basic pay; or

(ii) if the participant is assigned to a higher classification and is disabled while acting

in the higher classification, the final average basic pay that the participant would have received

had the participant been promoted to the higher classification under

§

6-1-208 of this Code.

(3) (i)

If

a participant has a total and permanent disability solely because the

participant is prevented from engaging in any occupation or employment for remuneration or



profit as a result of a non-duty related cause, the participant is entitled to receive an annual

disability retirement pension equal to the participant's accrued pension as of the participant's

date of disability computed in accordance with the provisions of

§

5-5-203 or 66 2/3% of the

participant's final average basic pay, whichever is greater.

(ii) If a participant has a total and permanent disability solely because the participant

is prevented from continuing as an employee in the participant's regular assignment or in some

other assignment within the Police Department, as a result of a non-duty related cause, the

participant is entitled to receive an annual disability retirement pension equal to the participant's

accrued pension as of the participant's date of disability, computed in accordance with the

provisions of § 5-5-203, or 20% of the participant's final average basic pay, whichever is greater.

(4) If a participant has a total and permanent disability as a direct result of performing

military service that qualifies as credited in-plan military service, has been discharged from the

military and awarded a monthly military disability pension, and is prevented from continuing in

the participant's regular assignment within the Police Department as a result of this disability,

the participant is entitled to receive an annual disability retirement payment equal to the

participant's accrued pension as of the date of disability, computed in accordance with the

provisions of

§

5-5-203, or 66 2/3% of the participant's final average basic pay less the monthly

amount of the military disability payment being received by the participant from the United

States Government at the time of retirement calculated on an annualized basis, or 20% of the

participant's final average basic pay, whichever is greater.

(e) Disqualification. Except for a participant whose disability retirement pension has been

in effect for at least five years, a participant ceases to qualify for a disability retirement pension

when:

(1) the Personnel Officer determines, on the basis of a medical examination by one or

more physicians selected by the Personnel Officer, that the participant no longer has a total and

permanent disability or has sufficiently recovered but refuses to resume the participant's regular

occupation as an employee or to be reemployed by the County in some other position for which

the participant is suited by, or that is appropriate to, the participant's training and experience; or

(2) the participant refuses to undergo a medical examination requested by the Personnel

Officer, provided the participant may not be required to undergo a medical examination more

than once a year.

(t)

Normal retirement date. Disability retirement benefits payable to a disabled

participant shall continue notwithstanding the fact that the participant reaches the participant's

normal retirement date.

(g) Benefits received under State law. Notwithstanding any other provision of this section

to the contrary, benefits received under this section are not affected by benefits received under

the Labor and Employment Article, Title 9, of the State Code.

(1985 Code, Art. 7,

§

5-205) (Bill No. 90-01; Bill No. 23-04; Bill No. 58-07; Bill No. 6-10)

2