Agenda Item 24A
May 21, 2015
Action
MEMORANDUM
May 19,2015
TO:
FROM:
County Council
~
Robert H. Drummer, Senior Legislative Attorney ..
-I
'lv
SUBJECT:
Action:
Expedited Bill 20-15, Deferred Retirement Option Plan-Amendments
Retirement Savings Plan-Annuity Guaranteed Retirement Income Plan-Election
Government Operations and Fiscal Policy Committee recommendation
Bill with amendments.
(3~O):
approve the
Expedited Bill 20-15, Deferred Retirement Option Plan-Amendments - Retirement
Savings Plan-Annuity
Guaranteed Retirement Income Plan-Election, sponsored by Lead
Sponsor Council President at the request of the County Executive, was introduced on April 21,
2015. A Government Operations and Fiscal Policy Committee worksession
was
held on April 23
and a public hearing was held on May 5.
Bill 20-15 would:
(l)
(2)
(3)
(4)
make the guaranteed retirement income plan the default retirement option for new
employees in the Office, Professional and Technical (OPT) or the Service, Labor
and Trades (SLT) bargaining units;
establish a new deferred retirement option plan for sworn deputy sheriffs and
uniformed correctional officers;
provide an annuity option for employees who participate in the retirement savings
plan; and
generally amend the County employee retirement laws.
Bill 20-15 would implement 2 agreements negotiated by the Executive with MCGEO Local
1994. Changing the default option for new employees represented by MCGEO and the addition
of an annuity option for all employees in the RSP resulted from an interest arbitration decision in
favor of the County. See ©55-68. MCGEO sought, in arbitration, a new open enrollment period
to elect the GRIP for those MCGEO members who are participating in the RSP. The arbitrator
agreed with the County that a new open enrollment period for existing RSP members was
inappropriate.
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The establishment of a new DROP for sworn deputy sheriffs and uniformed correctional
officers is part of the recently negotiated labor agreement with MCGEO for FY16. MCGEO
President Gino Renne submitted a letter to the Council President in support of the DROP. See
©
70. This new DROP would
be
similar to the existing DROP for sworn police officers.
An
eligible
employee could choose to enter the DROP at full retirement. Once in the DROP, the employee
would continue to work and receive his or her normal salary for up to 3 years. The employee
would stop making retirement contributions and stop earning more service time for retirement
while in the DROP. The County would pay the employee's retirement pension into a separate
DROP account. The employee must choose investment options for these funds similar to the RSP.
When the DROP period is over, the employee must leave County service and not return. The
employee would receive, the DROP account balance plus the pension the employee earned before
entering the DROP with enhancements to the pension for cost-of-living adjustments the employee
missed while in the DROP. As with the existing DROP for police and fire, the employee receives
this enhanced retirement benefit in return for providing management with advance notice of
retirement to aid management in succession planning. The Sheriff, in his letter supporting the new
DROP, cited succession planning as the benefit to his Office. See ©69.
Public Hearing
Linda Herman, Executive Director of the County Retirement Plans, testifying on behalf of
the Executive, supported the Bill to implement the recent Agreements with MCGEO.
GO Worksession
Linda Herman, Executive Director for the County Retirement Plans, represented the
Executive Branch. Steve Farber, Council Administrator, Aron Trombka, OLO, Craig Howard,
OLO, and Robert Drummer, Senior Legislative Attorney, represented the Council staff. The
Committee discussed the collective bargaining agreements with MCGEO, FOP, and IAFF as well
as Expedited Bill 20-15, which would implement the retirement amendments in the MCGEO
Agreement.
The Committee recommended (3-0) approving:
1.
2.
3.
4.
5.
6.
the GWA, Service Increments, and Longevity Increments
In
each
Agreement;
the tuition assistance in each Agreement;
the new special duty differential in the IAFF Agreement;
changing the default option to the GRIP for new employees represented by
MCGEO;
an annuity option for RSP members in the MCGEO Agreement; and
the new DROP for deputy sheriffs and uniformed correctional officers in
the MCGEO Agreement.
The Committee recommended (3-0) rejecting:
1.
the 80/20 cost share for group insurance benefits in each Agreement; and
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2.
the prescription drug plan for Medicare-eligible retirees in each Agreement
to the extent
it
conflicts with the County's move to EGWP plus wrap.
The Committee recommended (3-0) approval of Expedited Bill 20-15 with an amendment
requested by the Executive to prevent the Director of Corrections from entering the DROP
after appointment as Director.
Issues
1. What is the fiscal and economic impact of the Bill?
OMB submitted a fiscal and economic impact statement for each provision ofthe Bill. See
©18-21. The Bill contains 3 distinct changes to the retirement system that should be considered
separately.
(a)
GRIP Election.
Under current law, a new non-public safety employee must make
a non-revocable choice to participate in either the Retirement Savings Plan (RSP)
or the Guaranteed Retirement Income Plan (GRIP) within the first 150 days of full­
time employment. Under each plan, the County contributes 8% of salary and the
employee contributes 4% into a separate account. In the RSP, the employee must
direct the investment of the account balance among several investments provided
under the Plan.
In
the GRIP, the Board of Investment Trustees invests an
employee's account balance along with the defined benefit plan trust funds. The
County guarantees a return of 7.25%. The County bears the investment risk for
members ofthe GRIP. The employee bears the investment risk for members ofthe
RSP.
Many new employees fail to make a choice. Under current law, the default choice
is the RSP. Bill 20-15 would change this default choice to the GRIP for employees
represented by MCGEO. The Bill would not change the default choice for new
unrepresented employees. OMB attached a report from an actuary, Gabriel, Roeder
Smith & Co. (GRS), analyzing the potential fiscal impact ofthis change. See ©22­
31. Although the change is likely to increase the number ofemployees in the GRIP,
the fiscal impact depends entirely on the investment returns in the ERS Trust Fund.
Ifthey are greater
than
the 7.25% paid to the employee accounts, then it would have
a positive impact. If not, the impact would be negative. The only conclusion we
can draw from this analysis is that it would increase the County's investment risk.
OMB also estimated a one-time $10,000 cost to implement the change.
(b)
RSP Annuity.
Under current law, a member of the GRIP can choose to receive his
or her account balance upon retirement in the form of an annuity paid by the ERS
Trust Fund. The employee must transfer his or her account balance to the ERS
Trust Fund in return for periodic payments for the member's life and, if chosen, the
life of the member's spouse. The annuity is calculated based upon the member's
estimated life span (and the estimated life span of the member's spouse) in much
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the same manner as an insurance company would calculate an annuity. Since the
ERS Trust Fund does not charge fees or seek a profit, the annuity payout should be
greater than the payout offered by a private business. OMB attached a report from
GRS analyzing the potential fiscal impact ofthis change. See ©52-54. The annuity
option shifts both investment risk and longevity risk to the ERS Trust Fund. If the
investment returns are less than predicted, the annuity will have a negative fiscal
impact. If the member outlives his or her estimated lifespan, the annuity will have
a negative fiscal impact. Again, it is impossible to calculate the fiscal impact of
this risk, but it exists. OMB also estimated a one-time $10,000 cost to implement
the change.
(c)
DROP for Deputy Sheriffs and Uniformed Correctional Officers.
OMB estimated
a one-time $50,000 cost to implement the new DROP. See ©18. OMB attached a
report from GRS analyzing the potential fiscal impact of the new DROP. See ©32­
51. The Council's Office of Legislative Oversight analyzed the GRS report to
provide additional information on the fiscal impact of this new benefit. See ©71­
73. The Executive included no funds in FY16 for this benefit because the actuarial
evaluation to calculate the additional County contribution necessary to fund this
benefit will be calculated next year when payment begins.
If
the Council enacts
this new DROP, it will be paid for over the next 20 years through increased
County contributions to the ERS Trust Fund starting in FY17.
In
other words,
the County would be buying the new benefit now, but paying for it later.
GRS estimated that the total cost of the new DROP would range between $2.6 and
$4.1 million. OLO summarized its review ofthe actuary report as follows:
OLO finds that GRS used reasonable assumptions to estimate the
Nonetheless, given the lack of
cost of the proposed DROP.
experience data specific to the cohort that would receive the benefit
as well as the high cost sensitivity associated with small changes in
employee behavior, OLO concludes that the actual future cost ofthe
DROP could fall outside of the range calculated by GRS. Further,
OLO suggests that the Council take into account the immediate full
cost of the DROP when considering whether to approve this new
benefit.
2. Should the Council change the default choice to the GRIP for MCGEO employees?
Each new full-time non-public safety employee has 150 days after being hired to choose
either the GRIP or the RSP. If the employee fails to make a choice, the employee becomes a
member of the RSP. Unfortunately, many new employees fail to take advantage of this choice
despite being given information about both plans by Human Resources during orientation. While
we can only speculate why this happens, it may be that many employees hired at a young age are
not yet ready to think about retirement. The Executive did not recommend passing this change
through to unrepresented employees because ofthe increased risk from the GRIP and the potential
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increase in fees charged by the administrator for the RSP due to less participants and less money
to be invested. The Executive successfully argued against creating a new window for existing
MCGEO employees to transfer from the RSP to the GRIP for all ofthese reasons.
The Agreement with MCGEO to make this change for represented employees is
reasonable. The County is in a better position to bear the investment risk than its employees.
Committee recommendation
(3-0): approve the change in the default choice for MCGEO
employees.
3. Should the Council approve an annuity option for RSP members?
GRIP members already have this option. The Executive recommended passing the annuity
option through to unrepresented employees. Although it would increase the risk to the ERS Trust
Fund, it is reasonable to provide RSP members with the same distribution choices as GRIP
members.
Committee recommendation
(3-0): approve the new annuity option for RSP
members.
4. What is the purpose of the DROP for deputy sheriffs and uniformed correctional officers?
Sworn police officers and uniformed fire and rescue employees already have a similar
DROP. Fire fighters receive a guaranteed return on their money of 8.25% for members entering
the DROP before July 1,2013 and 7.5% for members entering on or after July 1,2013. Police
officers must direct their own investments. The DROP for sheriffs and corrections would require
the participant to direct his or her own investments.
The participant receives a tangible benefit. The participant can receive their retirement
pension (though deferred) with interest along with normal salary for the last 3 years ofemployment
before retirement. To some observers, this is double-dipping out of the same pot. What is the
benefit to management? Increased retirement benefits can help with retention and recruitment of
employees. However, we have not seen any evidence that the County is having difficulty
recruiting new employees for these positions.
It
is possible that an employee would choose to stay
longer because of the DROP, thus reducing the need
to
find a replacement. While this is likely in
the first few years after the DROP begins, it is also likely that over time employees will schedule
their entrance into the DROP 3 years before they would normally retire.
It
may encourage some
employees to leave earlier due to the large lump sum an employee can receive upon exit from the
DROP.
The Executive's actuarial report (GRS) estimates that using an assumption that employees
will stay
1.6
years longer due to the DROP would increase the County's liability by
$2.6
million,
but an assumption that employees only stay
1
year longer due to the DROP increases the County
IS
liability to
$4.1
million.
Small changes in employee behavior create large changes in the County's
liability. Predictions of employee behavior in this area are inherently inaccurate due to the lack of
experience with a DROP for these employees.
The most likely benefit to management would be succession planning. Sheriff Popkin
explained this as the reason he supports a DROP for deputy sheriffs. See ©69. Since deputy
sheriffs must complete the police academy training, the lead-time for hiring new deputy sheriffs is
significant. Scheduling a recruit class requires estimating the need for new employees. A DROP
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makes it easier to estimate when vacancies will occur. However, the extra lead time for hiring
deputy sheriffs does not apply to uniformed correctional officers because the initial training is
much shorter and done on an as-needed basis.
In
order for the DROP to support succession
planning, the employee must be required to leave County service at the conclusion of the DROP
and not return. The Bill uses the same language as the current law for police and fire, "when the
employee's participation in the DROP ends, the employee must stop working for the County and
receive a pension benefit." Seelines 136-138 at ©7.
5.. Are DROP plans used for deputy sheriffs and uniformed correctional officers in other
local jurisdictions?
.
Maryland State police and fire have a DROP. State corrections officers do not. Many
Maryland counties have a DROP for police and fire, but not for corrections. Those jurisdictions
that have a separate police force, such as Howard and Anne Arundel, have a DROP for police, but
not for deputy sheriffs. Baltimore County had a DROP for all employees, but ended it for new
employees hired after 2007. Charles County has a DROP for deputy sheriffs, but they do not have
a separate police force.
6. Is creating a new DROP for deputy sheriffs and uniformed correctional officers equitable?
Assuming that the major purpose of the DROP is an enhanced retirement benefit, it may
be considered equitable to create a DROP for deputy sheriffs and uniformed correctional officers
because it is a benefit enjoyed by police and fire. However, the County
has
divided its employees
into two major groups for retirement benefits - those with a defined benefit plan (the ERS), like
deputy sheriffs and correctional officers, and those with a defmed contribution plan (the RSP; the
GRIP is a hybrid plan, but the cost to the County is much closer to the RSP). More than half of
current employees are now in the RSP or the GRIP.
The difference
in
the retirement cost for these two groups is very large.
In FY16, the
County will contribute 8% ofsalary for employees in the RSP and the GRIP, but 38-40% of salary
for employees in the ERS. (Few private sector defined contribution plans offer an employer
contribution as large as 8%, and more than 40% of private sector workers have no retirement plan
at all.) For two County employees who both have a salary of $70,000, the first
in
the RSP or the
GRIP and the second
in
the ERS, the County will contribute $5,600 for the first employee and
about $28,000 for the second employee. Adding a DROP for deputy sheriffs and correctional
officers would further widen this gulf.
It
could add more than $4 million to the County's accrued
liability for the defined benefit plans. While it is payable over 20 years, beginning in FYI7, it is
real money. Is this the best use of this money?
7. Who would be eligible for the DROP?
The Bill would apply to a Correctional Officer I, Correctional Officer II, Correctional
Officer III, Correctional Dietary Officer I, Correctional Dietary Officer II, Correctional
Supervisor-Sergeant, Correctional Dietary Supervisor, Correctional Shift Commander-Lieutenant,
Correctional Unit Commander-Captain, Deputy Warden, Warden, and Director of the Department
of Corrections. The Bill would apply to Deputy Sheriff I, Deputy Sheriff II, Deputy Sheriff III,
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Deputy Sheriff Sergeant, Deputy Sheriff Lieutenant, Deputy Sheriff Captain, Assistant Sheriff,
and Chief Deputy Sheriff (Colonel).
The elected Sheriff would not be eligible for the DROP.
The Agreement only applies to those employees in bargaining unit positions. The Bill would pass
this benefit through to management, including the Director of Corrections. The purpose of
including upper management is to avoid discouraging employees from applying for management
positions. This seems reasonable, up to a point. It seems difficult to justify providing a DROP
retirement benefit for an appointed official such as the Director of Corrections.
I
Committee
recommendation (3-0):
amend the Bill to prohibit the Director of Corrections from entering the
DROP after appointment as Director. See lines 114-115 at ©6.
8. Technical amendments.
Recently, the County Attorney's Office notified Council staff of2 technical amendments
that should be made to the Bill.
1.
First, the MCGEO Agreement provides that a DROP participant who becomes
eligible for a non-service connected disability retirement pension after entering the
DROP should have his or her non-service connected disability pension calculated
as of the date the member
enters
the DROP. However, Bill 20-15, as sent over by
the Executive, was inadvertently drafted to calculate this benefit as ofthe member's
date of
exiting
the DROP.
In
order to conform to the Agreement, this change
should be made as shown on line 206 at ©9.
The MCGEO Agreement does not affect the retirement benefit for an employee of
a participating agency who is represented by a union. However, the Bill, as
introduced, should be amended to clarify that the change in the default election to
the DROP does not apply to an employee of a participating agency. This can be
corrected by making the changes shown on lines 75,89-90,291,336,
&
338 of the
Bill at ©4, 5, 12,
&
14.
2.
Committee recommendation (3-0):
After the April 23 worksession, the Committee approved
each of these technical amendments to conform to the MCGEO Agreement.
9. What are the Council's options for the DROP?
The Council has the final word on enacting this Bill. The Council is not part of the
collective bargaining process and is not bound by the Agreement. There are at least 4 options:
(a)
(b)
Enact the Bill as introduced.
Reject the DROP for the deputy sheriffs, uniformed correctional officers, or both.
Remove some or all ofupper managementfrom the DROP, such as the Director of
Corrections.
(c)
An employee hired as a Department Director from outside the County would not be eligible for the ERS or the
DROP.
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(d)
Reduce the maximum period ofparticipation.
One or two years of lead-time would
still give management the opportunity to plan for new hires while significantly
reducing the cost of the DROP.
If the Council rejects any part of the Agreement (options b or d), the Executive and
MCGEO would have 10 days from the adoption ofthe resolution indicating the intent to reject part
of the Agreement to attempt to renegotiate that provision. If the parties reach a modified
Agreement during that 10-day period, the new Agreement would be subject to Council review and
approval.
Ifthe Council decides to approve the DROP in any form for deputy sheriffs and uniformed
correctional officers, it should be clear that the language
in
lines 136-138, "when the employee's
participation in the DROP ends, the employee must stop working for the County and receive a
pension benefit," means that the participant must not return to County service. Otherwise, the
central rationale for the DROP, management's ability to use it for succession planning, would be
lost.
Committee recommendation (3-0): approve the Bill with the amendments described above.
This packet contains:
Expedited Bill 20-15
Legislative Request Report
County Executive Memo
Fiscal and Economic Impact statement
Arbitrator Decision
Sheriff Popkin letter
Gino Renne letter
OLD Fiscal Impact Analysis
Tom Lowman Analysis
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Expedited Bill No.
20-15
Concerning:
Deferred
Retirement
Option Plan - Amendments ­
Retirement Savings Plan - Annuity ­
Guaranteed Retirement Income Plan
- Election
Revised: May 7.
2015
Draft No.
.;:;. 6_ _
Introduced:
April
21, 2015
Expires:
October
21. 2016
Enacted: ___________________
Executive: _____________
Effective: ______________
Sunset Date: ......
N=0o.:.:n=e-:--_ _ _ __
Ch, _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: Council President at the Request of the County Executive
AN EXPEDITED ACT
to:
(1)
(2)
(3)
(4)
make the guaranteed retirement income plan the default retirement option for
certain employees;
establish a deferred retirement option plan for sworn deputy sheriffs and uniformed
correctional officers;
provide an annuity option for employees who participate in the retirement savings
plan; and
generally amend the County employee retirement laws.
By
amending
Montgomery County Code
Chapter 33, Personnel and Human Resources
Sections 33-37, 33-38A, 33-44, 33-115 and 33-120
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffected by bill.
* * *
The County Council for Montgomery County, Maryland approves the following Act:
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Expedited Bill No. 20-15
1
2
3
Sec.
1.
Sections 33-37, 33-38A, 33-44, 33-115, and 33-120 are amended
as follows:
33-37. Membership requirements and membership groups.
(a)
Full-time employees.
(1)
A full-time employee ofthe County or participating agency must
become a member of a County retirement plan as a condition of
employment, when the employee meets the applicable eligibility
requirements, if the employee waives all rights of membership
under any other retirement system supported in whole or in part
by the State, a political subdivision ofthe State, or the County.
4
5
6
7
8
9
10
11
(2) A
part-time employee who becomes a full-time employee and is
not an active member of any County retirement plan must
become an active member of:
12
13
14
(A)
the integrated retirement plan, if the employee is eligible
for membership in the integrated plan;
15
16
17
(B)
the Retirement Savings Plan, if the employee satisfies the
requirements for membership in Group I or II, even if the
employee did not begin or return to County service on or
after October 1, 1994 and participates as described
in
18
19
20
21
22
23
24
Section 33-115; or
(C) the guaranteed retirement income plan if the employee is
eligible for membership and [elects to] participate§ as
described in subsection (k).
(3) A temporary employee who becomes a full-time employee must
become an active member of:
(A) the integrated plan, if the employee
membership in the integrated plan;
2
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IS
eligible for
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Expedited Bill No. 20-15
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31
32
33
34
(B)
the Retirement Savings Plan, if the employee satisfies the
requirements for membership in Group I or II, even if the
employee did not begin or return to County service on or
after October 1, 1994 and participates as described in 33­
115; or
(C)
the guaranteed retirement income plan if the employee is
eligible for membership and [elects to participate]
participates as described in subsection (k).
35
36
37
(b)
Part-time employees.
(1)
A part-time employee ofthe County or participating agency may
become a member of a County retirement plan if the employee
waives all rights of membership under any other retirement
system supported in whole or in part by the State, a political
subdivision of the State, or the County. Membership is effective
on the date the employee's application for membership is
approved.
(2)
A part-time employee who is not an active member of a
retirement plan may become a member of either:
38
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42
43
44
45
46
47
48
49
(A)
the integrated plan, if the employee
membership in the integrated plan;
IS
eligible for
(B)
the Retirement Savings Plan if the employee satisfies the
requirements for membership in Group I or II, even if the
employee did not begin or return to County service on or
after October 1, 1994 and elects to participate as described
in Section 33-115; or
50
51
52
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Expedited Bill No. 20-15
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(C)
the guaranteed retirement income plan if the employee is
eligible for membership and elects to participate as
described in subsection (k).
*
(k)
*
*
*
*
[Election to join] Eligibility for the guaranteed retirement income plan.
*
(3)
An
eligible full-time employee hired on or after July 1,2009 and
before July
1.,.
2015, and a part time or temporary employee who
becomes full time on or after July 1, 2009 and before July
L
2015, who does not participate in the retirement savings plan,
may elect to participate in the guaranteed retirement income plan.
An
eligible employee must make an irrevocable election during
the first 150 days of full time employment.
If an eligible
employee elects to participate, participation must begin on the
first pay period after an employee has completed 180 days of full
time employment.
An
employee who does not participate in the
guaranteed retirement income plan must participate in the
retirement savings plan beginning on the first pay period after the
employee completes 180 days of full time employment.
72
73
74
75
76
77
78
79
*
Q)
*
*
A member of the Office, Professional and Technical (OPT) or
the Service, Labor and Trades (SL T) collective bargaining unit
of the County government must participate in the guaranteed
retirement income plan unless the employee makes g one-time
irrevocable election to participate in the retirement savings plan
during the first 150 days of full time employment, if the
employee:
4
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Expedited Bill No. 20-15
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81
82
fA}
is hired as
£!
full-time employee on or after July
L
2015;
or
on
is
£!
part time employee who does not participate in the
retirement savings plan and becomes
£!
full-time employee
on or after July
L
2015.
83
84
85
Participation must begin on the first
P£!Y
period after an employee
has completed 180 days of full time employment.
86
87
88
89
90
00
On
or after July
L
2015, an eligible full-time employee or
~
part­
time or temporary employee who becomes
£!
full-time employee
in
£!
position that is not within
~
bargaining unit or an eligible
employee of a participating agenc"X must participate in the
retirement savings plan unless the employee makes
£!
one-time
irrevocable election to participate in the guaranteed retirement
income plan during the first 150 days of full time employment.
If the employee elects to participate, participation must begin on
the first
P£!Y
period after an employee has completed 180 days of
full-time employment. A part-time employee who participates
in either the retirement savings plan or the guaranteed retirement
income plan when the employee becomes
!!
full-time employee
must continue to participate in the same retirement plan.
[(7)](2} An individual who changes employment from the County
government to a participating agency or from a participating
agency to the County government must continue to participate in
his or her retirement plan and is not eligible to make an election.
91
92
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105
33-38A. Deferred Retirement Option Plans.
*
*
5
*
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Expedited Bill No. 20-15
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131
ill
DROP Plan for Sworn Deputy Sheriffs and Uniformed Correctional
Officers.
ill
Uniformed correctional officer
means Correctional Officer 1
Correctional Officer
I1.
Correctional Officer III, Correctional
Correctional
Dietary
Supervisor,
Dietary Officer 1 Correctional Dietary Officer I1 Correctional
Supervisor-Sergeant,
Correctional Shift Commander-Lieutenant, Correctional Unit
Commander-Captain, Deputy Warden, and Warden. [[and]] The
Director of the Department of Corrections must not begin
participation in the DROP after appointment as Director.
ill
Sworn Deputy Sheritfmeans
Deputy Sheriff1 Deputy SheriffI1
Deputy Sheriff III, Deputy Sheriff Sergeant, Deputy Sheriff
Lieutenant, Deputy Sheriff Captain, Assistant Sheriff, and the
Chief Deputy Sheriff (Colonel).
ill
Eligibility.
A sworn deputy sheriff or uniformed correctional
officer who is at least age 55 years old and has at least
li
years
of credited service or is at least 46 years old and has at least 25
years of credited service may participate in the DROP.
A
uniformed correctional officer or sworn deputy sheriff must
participate in the optional retirement plan or the integrated
retirement plan as
the DROP.
~
Group E member in order to participate in
ill
Application requirements.
An
eligible employee must apply at
least 60 days before the employee becomes g participant. An
employee may withdraw g pending application within
after submitting the application.
6
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~
weeks
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ill
Employee participation and termination.
The employee's
participation in the DROP must begin on the first day of!! month
that begins at least 60 days, but not more than 90 days, after the
employee applied and must end
J.
years after the employee begins
to participate or at an earlier date chosen
Qy
the employee. When
the employee's participation in the DROP ends, the employee
must stop working for the County and receive !! pension benefit.
®
Employment status.
An employee who participates in the DROP
must continue to be!! member ofthe retirement system, earn sick
and annual leave, and remain eligible to participate in health and
life insurance programs.
ill
Retirement date, retirement contributions, and credited service.
The retirement date of an employee who participates in the
DROP is the date when the employee begins to participate in the
DROP,
and the
employee must not make
retirement
contributions after that date.
An employee who wishes to
purchase prior service must do so before the employee's
participation in the DROP begins. Sick leave in excess of 80
hours must be credited towards retirement at the beginning ofthe
employee's participation.
ill
Pension benefits.
(A)
Before an employee's participation begins, the employee
must select a:
ill
(ii)
pension payment option under Section 33-44 for the
regular retirement pension payments; and
pension payment distribution option for the
distribution of the employee's DROP account.
7
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Expedited Bill No. 20-15
159
Qll
A pension benefit must not be paid to the employee while
the employee participates in the DROP, but must be
deposited in
f!
DROP account established for the
participant
!2y
the County. The participant must receive
the account balance and the County must close the account
within 60 days after the employee stops participating in
the DROP. Subject to any requirements of the Internal
Revenue Code and other applicable law, the employee
may roll over the account balance into an eligible
retirement plan.
160
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172
{£}
An
employee must direct the Board of Investment
Trustees to allocate pension benefits contributed to the
employee's DROP account in one or more of the
investment funds selected
!2y
the Board.
An
employee's
direction of investment must remain in effect until the
employee changes the direction.
An
employee must select
investment options in order to participate in the DROP.
173
174
175
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178
179
!ill
After the employee's participation in DROP ends, the
employee's pension benefit will
be based
on:
ill
the employee's credited service immediately prior
to the beginning of the employee's participation in
the DROP, adjusted to include credit for unused
sick leave under Section 33-41;
180
181
182
(ii)
the employee's average final earnings. excluding
earnings during the period of participation in the
DROP; and
8
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(iii)
increases in the consumer price index during the
period of the employee's participation that would
have resulted in an increase
in
the employee's
pension benefit if the employee had not been
participating in the DROP.
(2)
Disability retirement.
An
employee may apply for disability
retirement prior to the termination of the employee's
participation in the DROP.
®
A DROP participant who is eligible for
~
servlce­
connected disability retirement must choose either:
ill
eii)
the retirement benefit under the DROP and the
DROP account balance; or
the service-connected disability retirement benefit
that the employee would have received if the
employee had continued as an active employee and
had not elected to participate
in
the DROP, and no
DROP account balance.
an
A DROP participant who is eligible for
~
non-service­
. connected disability retirement benefit must receive the
non-service-connected disability retirement benefit under
Section 33-43(h), with the benefit calculated as of the
member's DROP [[exit]) entry date, plus the DROP
account balance.
(Q
If
~
DROP participant ends participation in the DROP
before
~
final decision is made on the disability retirement
application, the DROP account must not be distributed
until
~
final decision is made.
9
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211
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212
ilQ)
Death benefit.
If an employee dies during the employee's
213
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~
participation in the DROP, the employee's beneficiary will
receive:
CA)
the death benefit that the beneficiary would have received
if the employee had retired on the date on which the
employee. began to participate in the DROP, adjusted
under subparagraph (7)CD); and
an
the balance of the employee's DROP account.
A member may have the
§:
an
DROP account distribution options.
balance of the DROP account distributed as
lump sum or an
annuity, or have some or all paid directly to an eligible retirement
plan as
§:
direct rollover distribution. If the member dies before
the balance of the DROP account is distributed, the beneficiary
may receive distribution of the balance under any option
described in this paragrwh as allowed under the Internal
Revenue Code and applicable regulations.
33-44. Pension payment options and cost-of-living adjustments.
* *
*
Transferfrom Retirement Savings Plan.
A participant who transfers his or her retirement savings plan account
balance under Section 33-120 may elect to receive his or her account
balance paid as an annuity under subsection (g)(2).
33-115. Participant requirements and participant groups.
(a)
Participant Requirements.
(1) Full-time employees.
(A) Except as provided in paragraphs (3)[,] and (4), [and (7)]
and the last sentence of Section 33-37(e)(2), a full-time
10
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Expedited Bill No. 20-15
239
240
241
242
employee eligible for membership in Group I or Group II
must participate in the Retirement Savings Plan or the
Guaranteed Retirement Income Plan when the full-time.
employee meets the applicable eligibility requirements or
forfeit employment, unless the Chief Administrative
Officer exempts the employee from participation.
. (B)
A part-time employee who becomes a full-time employee
and is not an active member of any retirement plan for
County employees, must become a member of:
(i)
the integrated retirement plan, if the employee is
eligible for membership in the integrated plan;
(ii)
the Retirement Savings Plan, if the employee
qualifies for Group I or II, even if the employee did
not begin or return to County service on or after
October 1, 1994; or
(iii)
the Guaranteed Retirement Income Plan if the
employee is eligible for membership [and makes an
election].
(C)
A temporary employee who becomes a full-time employee
must become an active member of:
(i)
the integrated plan, if the employee is eligible for
membership in the integrated plan;
(ii)
the Retirement Savings Plan, if the employee
satisfies the requirements for membership in Group
lor II, even if the employee did not begin or return
to County service on or after October 1, 1994; or
11
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(iii)
the Guaranteed Retirement Income Plan if the
employee is eligible for membership in the
Guaranteed Retirement Income Plan [and makes an
election under subsection (7)].
*
(7)
*
*
III
[Election to participate] Participation
Retirement Income Plan.
(A)
the Guaranteed
[A
full time employee hired or rehired on or after July 1,
2009 and a part time and temporary employee who
becomes full time after July 1, 2009 participate in the
guaranteed retirement income plan.
An
eligible employee
must make a one-time irrevocable election during the first
150 days ofemployment. If an eligible employee elects to
participate, participation must begin on the first pay period
after an employee has completed 180 days of full time
employment. A full time employee who does not elect to
participate in the guaranteed retirement income plan must
participate in the retirement savings plan beginning on the
first pay period after the employee has completed 180 days
of full time employment.]
A participant who changes
employment from the County directly to a participating
agency or from a participating agency directly to the
County must continue to participate in his or her
retirement plan and is not eligible to make an election. A
member of the Office, Professional and Technical (OPT)
or the Service, Labor and Trades (SLT) collective
bargaining unit ofthe County government must participate
12
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Expedited Bill No. 20-15
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in the Guaranteed Retirement Income Plan, unless the
employee makes
~
one-time irrevocable election to
participate in the Retirement Savings Plan during the first
150 days of full time employment, if the employee:
ill
(ii)
is hired as
~
full-time employee on' or after July L
2015; or
is
~
part time employee who does not participate in
the Retirement Savings Plan and becomes
time employee on or after JulyL 2015.
~
~
full­
Participation must begin on the first
period after an
employee has completed 180 days of full time
employment.
(B)
Except as provided
In
subparagraph
®
an eligible
employee must participate in the Retirement Savings Plan
unless the employee makes
~
one-time irrevocable election
to participate in the Guaranteed Retirement Income Plan
during the first 150 days of full-time employment.
Participation must begin on the first
~
period after an
<
employee has completed 180 days of full-
time
employment. A part-time employee who participates in
either the Retirement Savings Plan or the Guaranteed
Retirement Income Plan when the employee becomes
~
312
313
314
315
316
317
318
full-time employee must continue to participate in the
same retirement plan.
!£}
A part time employee who is not a participant in the
Retirement Savings Plan may make a one-time irrevocable
election to participate in the Guaranteed Retirement
13
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Expedited Bill No. 20-15
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Income Plan any time after the employee has completed
150 days of employment.
(b)
Participants groups and eligibility.
(1)
Group I.
Except as provided in the last sentence of Section 33­
37(e)(2), any full-time or career part-time employee meeting the
criteria in paragraphs
(A)
or (B) must participate in the retirement
savings plan ifthe employee begins, or returns to, County service
on or after October 1, 1994.
An
employee hired on or after July
1, 2009 must be employed on a full time or part time basis with
the County for 180 days before participating in the Retirement
Savings Plan.
An
individual who changes employment from the
County government directly to a participating agency or from a
participating agency directly to the County government must
continue to participate in the same retirement plan. Participation
in the Retirement Savings Plan must begin on the first payroll
after an employee has completed 180 days of employment if the
employee:
(A)
(i)
is not represented by
[[an]]
~
County government
employee organization;
(ii)
does not occupy a County go.:BLrnment bargaining
unit position;
(iii)
(iv)
is not a public safety employee; and
does not elect to participate in the Guaranteed
Retirement Income Plan; or
(B)
(i)
is not a public safety employee; and
is subject to the terms of a collective bargaining
agreement between the County and an employee
14
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organization which requires the employee to
participate in the [retirement savings] Guaranteed
Retirement Income Plan if the employee does not
elect to participate
in
the [guaranteed retirement
income] Retirement Savings Plan; and
(iii)
[does not elect] elects to participate m the
Retirement Savings Plan [guaranteed retirement
income plan].
*
33-120.
Distribution of Benefit.
*
*
*
*
*
(f)
Distribution methods.
The Chief Administrative Officer must pay, at
the request of the participant or the designated beneficiary, a
participant's account balances in the retirement savings plan upon
retirement, disability retirement, death, or separation from County
servIce.
*
*
*
Optional method
gf
distribution
:
Transfer to Employees'
Retirement System, Annuity Option.
A participant may elect to
have the participant's entire account balance transferred to the
employees' retirement system and have the account balance paid
in one ofthe annuity options available under Section
33-44(g)(2).
*
*
*
Sec. 2. Expedited Effective Date.
The Council declares that this legislation
is necessary for the immediate protection ofthe public interest. This Act takes effect
on July 1,2015.
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LEGISLATIVE REQUEST REPORT
Expedited Bill 20-15
DROP-Amendments RSP-Annuity
-
GRIP-Election
DESCRIPTION:
Amend the County's retirement law to support the collective
bargaining agreement entered into with the Municipal and County
Government Employees Organization, Local 1994 (MCGEO) and
the arbitrator's decision.
In order to implement the collective bargaining agreement entered
into with the Municipal and County Government Employees
Organization, Local 1994 (MCGEO) and the arbitrator's decision,
the retirement law needs to be amended.
PROBLEM:
GOALS AND
OBJECTIVES:
The Bill amends the retirement law to: (a) establish the Guaranteed
Retirement Income Plan (GRIP) as the default retirement option
for all MCGEO employees hired after July 1,2015;
(b)
establish a
new Deferred Retirement Option Plan (DROP) for sworn deputy
sheriffs and uniformed correctional officers; and (c) provide an
annuity option for employees who participate in the Retirement
Savings Plan (RSP) from the ERS.
COORDINATION:
Montgomery County Employee Retirement Plans
&
Office of
Human Resources
FISCAL IMPACT:
Office of Management and Budget
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
Department of Finance
N/A
N/A
Linda Herman, Executive
Employee Retirement Plans
Shawn Stokes, Director, OHR
Director,
Montgomery
County
APPLICATION
WITHIN
MUNICIPALITIES:
NI
A
PENALTIES:
N/A
F:\LAW\BILLS\1520 Retirement - RSP - GRIP· Default - Annuity\LRR.Doc
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~ -)~J
-
&.
5t;f
1n5 H'R 16 h11 9: 3q
OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLE, MARYLAND 20850
~
-;)
LL.
Isiah Leggett
County Executive
MEMORANDUM
April 7,2015
MONTGIJM£R~(COU»TY
R[CE1VED
COUNCIL
La.,..
J?
-)
010
J;
TO:
George Leventhal, President
County Council
Isiah Leggett, County Executiv
Expedited Legislation to Amend Chapter 33, Personnel and Human
Resources.
FROM:
SUBJECT:
I am attaching for the Council's consideration a Bill that would amend the
County's retirement law to support the collective bargaining agreement entered into with
the Municipal and County Government Employees Organization, Local 1994 (MCGEO)
and the arbitration award. The Bill amends the retirement law to (a) establish the
Guaranteed Retirement Income Plan (GRIP) as the default retirement option for all
MCGEO employees hired after July 1, 2015;
(b)
provide for a Deferred Retirement
Option Plan (DROP) for sworn deputy sheriffs and uniformed correctional officers; and
(c) provide an annuity option for employees who participate in the Retirement Savings
Plan (RSP) from the ERS.
Attachments
c:
Linda Herman, Executive Director, MCERP
Jennifer Hughes, Director, OMB
Shawn Stokes, Director, ORR
Joseph Beach, Director, Finance
montoomervcountvmd.gov/311
~ii!lt'
~'':':~
,..e'!'~
240-773-3556 TTY
®
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-
'.
\
.1 ....
.... 1
Fiscal Impact Statement
Expedited Council Bill XX-IS Retirement - Employees' Retirement System Deferred
Retirement Option Plan - Amendments - Retirement Savings Plan,,",:, Guaranteed
Rep,rement Income Plan - Election·
1. Legislative Summary.
This bill implements changes to County employee retirement options as a result of the
collective bargaining process. Changes include the following: 1) set the default option
for all new employees in MCGEO effective July 1,2015 to the Guaranteed Retirement
Income Plan (GRIP); 2) provide Retirement Savings Plan (RSP) participants with the
same option to purchase an annuity from the Employees' Retirement System as GRIP
participants; and 3) establish a Deferred Retirement Option Plan (DROP) for sworn
deputy sheriffs, uniformed correction officers, uniformed sheriff management, and
uniformed correctional management.
2.
An
estimate of changes
in
County revenues and expenditures regardless of whether the
revenues or expenditures are assumed in the recommended or approved budget. Includes
source of information, assumptions, and methodologies used.
Implementation of this bill requires one-time changes to various systems. For the GRIP
default change, the Oracle payroll system must be updated to reflect default retirement
status for an estimated one-time impact of $10,000. Additionally, the implementation of
the RSP annuity offering will require one time programming changes to PeopleSoft, the
pension administration system, for an estimated $10,000. For the addition of the DROP,
there are one-time costs of$30,000 to establish the plan with Fidelity, the County's
recordkeeper, $10,000 to program Oracle payroll changes, and $10,000 for PeopleSoft
programming changes.
The County's pension actuary, Gabriel Roeder Smith
&
Company (GRS), has determined
that the GRIP and RSP annuity
will
not increase costs. According to GRS, the actuarial
cost of the DROP would require an additional County contribution of between $84,675
and $253,679 annually beginning in FYI7.
3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
The total additional expenditures from the GRIP default and RSP annuity offering are
estimated at $20,000 in the first year, and no additional costs over 6 years.
The total additional expenditures from the DROP change are estimated at $50,000 in the
first year, and between $84,675 and $253,679 in each year afterwards for a total
estimated cost of between $473,375 and $1,318,395. The total impact of this bill would
be estimated at $70,000 in the first year, and between $493,375 and $1,338,395 over 6
years.
4.
An
actuarial analysis through the entire amortization period for each bilI that would affect
retiree pension or group insurance costs.
See attached.
5.
An
estimate of expenditures related to County's information technology (IT) systems,
including Enterprise Resource Planning (ERP) systems.
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, .I
As
mentioned
in
#2,
there is a total one-time impact of
$20,000
to make payroll changes,
o;md a one-time impact of
$20,000
to make PeopleSoft programming changes.
6. Later actions that may affect future revenue and expenditures if the bill authorizes future
spending.
Not applicable.
7.
An
estimate of the staff time needed to implement the bilL
No additional staff time will be required to implement the bill.
8.
An
explanation ofhow the addition of new staff responsibilities would affect other duties.
No additional
staff
responsibilities would be added.
9. An
estimate of costs when an additional appropriation is needed.
No additional appropriation is necessary, as the retirement funds will absorb the'
implementation cost. An additional appropriation would be required
in
FYI7,
as noted
in
#2,
to fund the actuarial cost of the DROP.
. 10. A
description of any variable that could affect revenue and cost estimates.
The DROP cost range could be affected by a participation rate different from the actuarial
.
assumed rate.
11.
Ranges ofrevenue or expenditures that are uncertain or difficult to project.
See
#
2.
12.
If
a
bill
is likely to have no fiscal impact, why that is the case.
Not applicable.
13.
Other fiscal impacts or comments.
Not applicable.
14.
The following contributed to and concurred with this analysis:
Corey Orlosky, Office of Management and Budget
Linda Herman, Executive Director, Montgomery County Employee Retirement Plans
Date
I
,
.
,
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..'_ J
.,
;
Economic Impact Statement
Bill ##-15, Retirement - Employees' Retirement System - Deferred Retirement
Option Plan - Retirement Savings Plan -Guaranteed Retirement Income Plan ­
Election -
Annuity
Background:
This legislation would amend the law regarding the Employees' Retirement System
(ERS) to:
• establish the
Guaranteed
Retirement Income Plan
(GRIP)
as the default retirement
option for all MCGEO employees hired
after
July 1,2015;
• provide for a Deferred Retirement Option Plan (DROP) for sworn deputy
sheriffs
and uniformed correctional officers; and
•. provide an annuity option for employees who participate in the Retirement
Savings Plan (RSP) from the ERS.
1. The sources of information, assumptions, and methodologies
used.
The source ofinformation
is
from the staffof the Montgomery County Employee
Retirement Plans. Assumptions and methodologies used·have been provided by the
ERS'
actuary.
2. A description of any variable that could affect the economic impact estimates.
The estimate ofcosts is based upon projections including participation rates (DROP),
life expectancies (RSP annuity offering), investment earnings
(GRIP)
and other
demographic assumptions from the actuarial analysis. Ifthe actual assumptions are
different than what was estimated by that analysis for each ofthe three projections
and demographic assumptions, there could be an economic impact. At this time, it is
Uncertain what changes to the estimated projections and demographic assumptions
would be and would have on the future economic impacts.
3~
The Bill's positive or negative effect,
if
any on employment, spending, saving,
investment, incomes, and property values in the County.
The proposed legislation amends the law regarding the ERS that would result in
changes to the participation ofvarious groups
in
the retirement plans offered by the
County. However, based on the actuarial analysis cited in section 2, changes
in
participation
will
not impact the County's property values, incomes, investment,
saving, .or spending of County residents.
4.
If
a Bill
is
likely to have no economic impact, why is that the case?
See paragraph #3 above.
5. The following contributed to or concurred with this analysis: David Platt
and
Rob
Hagedoom, Finance; Linda Herman, Executive Director, Montgomery County
Employee Retirement Plans.
Page 1 of2
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£ ",.
... .1
Eeonomie Impact Statement
Bill ##-15, Retirement - Employees' Retirement System - Deferred Retirement
Option Plan - Retirement Savings Plan -Guaranteed Retirement Income Plan - .
Election - Annuity
Page2of2
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GRS
March 19,2015
Gabriel Roeder Smith
&
Company
ConsuItann;
&
Actuaries
20 North Dark Street
Su.ite 2400 .
Chicago.
n..
60602-5111
312.456.9800 phone
312.456.9801
fax
www.gabrielroede:r.com
Ms. Linda Herman
Executive Director
Montgomery County Employees' Retirement System
Rockville, Maryland
Re: Projections ofthe Guaranteed Retirement Income Plan (GRIP) under Alternate New
Hire GRIP Election Scenarios (Update to January 26, 2015, letter)
Dear Linda:
In accordance with your request, we have performed projections of the Guaranteed Retirement
Income Plan County contribution requirement and funded ratio based on the actuarial valuation
as of July 1,2014, under alternate new hire GRIP election scenarios.
The new hire election (or defaulting into) GRIP scenarios that we considered include the
following. The percentage of new hires that are not assumed to elect GRIP are assumed to elect
the Retirement Savings Plan (RSP).
NewHires Elect GRIP
Scenario
Baseline - 33 1/3% Elect GRIP
50% Elect GRIP
66
2/3%
EJect GRIP
Percentage of New Percentage of New
Hires Electing GRIP Hires Electing RSP
33 113%
50%
662/3%
50%
33113% .
662/3%
For each ofthe new hire election scenarios outlined above, we performed projections showing
the GRIP County contribution requirement and funded ratio assuming a future investment return
of 7.50%. The results of our projections for each of the three new hire GRIP election scenarios
are summarized in Graph A and Exhibit A.
Exhibit A also illustrates projected RSP payroll and projected County contribution dollars
combined for GRIP and RSP. Due to the volume of data from the projections, we summarized
the key projection information in the exhibits.
For these projections, we used the GRIP census data used
in
the actuarial valuation as ofJuly 1,
2014, and census data provided by Pat Paoli on January 12,2015, for current RSP members.
@
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Ms. Linda Herman
Montgomery County Employees' Retirement System
March 19,2015
Page 2
The projection scenarios are based on the following data and assumptions:
• Census data file of current RSP members provided by the County, including:
o Demographic information for each participant (date of birth and date of hire)
o
RSP balance as of June 30, 2014
o
Contributions for each year ending June 30 for the period 2012 through 2014
• Approximately 3,500 active RSP members were included in the analysis from the data
file
• Pay rates and salaries were not available for RSP members. Therefore, we estimated the
2014 pay rate based on the actual contribution amounts received in the data and used it to
project future contributions
.
• Assumptions from the actuarial valuation as of July 1,2014, for GRIP members
including assumptions for salary increases, tennination rates, retirement rates, and pre­
retirement mortality
Exhibit B summarizes the actuarial assumptions and methods for GRIP used in the analysis and
Exhibit C summarizes the GRIP benefit provisions. For purposes of projecting RSP payroll, we
have assumed the RSP member behavior and salary increases would follow the same
assumptions as GRIP.
The County contribution rate to the RSP is 8.00% ofpay. The County normal cost rate for GRIP
is approximately 7.30% ofpay based on an investment return assumption of 7.50% and a GRIP
interest crediting rate of 7.25%. When GRIP experiences gains and assets exceed liabilities, the
County contribution rate will be lower than normal cost. When GRIP experiences losses and
there is an unfunded liability, the County contribution rate will be higher than normal cost.
The GRIP County contribution rate during the 20 year projection period is less than 8.00% under
all new hire GRIP election scenarios. For the majority of the 20-year projection period, total
projected County contribution dollars decrease as the percentage of new hires electing GRIP
increases.
Because the County bears the investment risk for the GRIP and the plan members bear the
investment risk for the RSP, higher GRIP elections for new hires will result in the County
undertaking more risk. However, the County also benefits from the rewards (if investment
returns are favorable).
Stochastic projections which simulate future investment returns for
a
number ofpotential future
outcomes (such as 1,000 outcomes) could help illustrate the probability of alternative investment
return scenarios occurring. However, stochastic projections were outside the scope of this
assignment.
Future actuarial measurements may differ significantly from the current measurements presented
in this cost analysis, due to such factors as the following: plan experience differing from that
anticipated by the economic or demographic assumptions; changes in economic or demographic
assumptions; and changes in plan provisions, contribution amounts or applicable law.
Gabriel Roeder
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Company
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Ms. Linda Hennan
Montgomery County Employees' Retirement System
March 19,2015
Page 3
If
any ofthe provisions, underlying data or assumptions used in this analysis appear to be
incorrect or unreasonable, please let us know as soon as possible so we can update the analysis.
The signing actuaries are independent ofthe plan sponsor.
Lance Weiss and Amy Williams
are
Members ofthe American Academy ofActuaries
(MAAA)
and meet the Qualification Standards ofthe American Academy ofActuaries
to
render the
actuarial opinion herein.
Please let
us
know if you have any questions or would like to discuss the results of this analysis
further.
Sincerely,
cJr'~ d.:.~,;
Weiss,43A~
FCA, MAAA
J
~v~
Amy Williams, ASA, MAAA
Consultant
Lance
J.
Senior Consultant
LW/AW:mrb
Gabriel Roeder Smith
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Graph A
Projected Funded Ratio and County Contribution Amounts Based on
Future Annual Investment Return
of
7.50%
and Alternate New Hires GRIP Election
.
Scenarios
125.0%
120.0%
115.0%
110.0%
.~
14.00%
12.00%
10.00%
~
-8
1:1
~
105.0%
.." 100.0%
95.0%)
90.0%
' H
n
"~'
; . ;'1
i',
I~I
'
~IIJ-fIIJ-.'H~~J-.lJ-fjill:'r~lItij
,',j .
I'J,'
".
"
~
. j - , r - - ' r -
"I
I \ l
"
1.,
.
"H'
l-.!:'HiQ'
~'I
q ,;
It
'I
;.
FJ
'I
'J
n
'~"
;I-:'l-~!
,
'1
;lr-1rl~---"r-'l---""
l;,!
t~
;i,
'~
'
"
.
"
,
il . . .
:I-.1~4:ihfh.t~~.
,:HII:HII!j
;;':1
c
.· . "
"
8.00010
~
1t
:;::
1:1
<:>
6.00010
li
U
B
g
4.00010
2.00010
80.0%
75.0%
f\~
0.00010
~
~
\\-~
f\~
~
f\\
N-~
~
f\\
N-~
~
f\\
N-~
':':I~
Valuation Year/Fiscal Year Ending
®
Gabriel Roeder Smith
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Company
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Exhibit A
Montgomery County Employees! ReUrement System
Projection Results - Comllarison of GRIP Results Under Alternative Future Investment Return Scenarios
Results Based on July 1, 2014 Actuarial Valuation and 33113%,50% and 66
2/3%
of New IDres Elect GRIP
A..um.. Annual ItlYe.lmelll Relurn of 7.50%
($
In IhoUlAllds)
Year
Ended
~
2014
2015
2016
2011
2018
2019
2020
2021
2022
2023
2024
2025
2026
2021
2028
2029
2030
2031
2032
2033
2034
In•••I...nl
Retum
11.66%
7.50%
1.50%
1.50"A
7.50"A
1.50%
7.50%
7.50%
7.50%
7.50"10
7.50"A
1.50"10
7.50%
1.50%
1.50"A
1.50"'->
7.S0%
7.SO%
7.50%
1.50"10
7.S0%
GRIP Ac,lve Member
P0E!I.tlon
%
of New IIlre. Elect GRIP
B,,_eline
so'",
66::113%
1,263
1,263
1,263
1,346
1,445
1,544
1,754
1,409
1,581
1,465
1,942
1,703
2,114
1,516
1,815
1,562
2,269
1,916
2,413
1,604
2,008
1,641
2,546
2,094
2,611
1,676
2,173
1,707
2,247
2,786
1,736
2,895
2,316
1,762
2,319
2,996
1,786
3,089
2,437
3,176
1,808
2,492
3,256
1,828
2,542
1,847
2,589
3,331
1,863
3,399
2,631
1,878
2,669
3,461
3,511
1,892
2,705
1,904
2,137
3,569
1,916
2,761
3,611
GRIP Acllve Member P":l:roll
%
of New HIre, EI.cl GRIP
Baseline
50%
66213%
$
83,226
$
83,226
$
83,226
90,508
95,816
101,124
97,399
107,121
116,844
104,484
118,591
132,699
111,923
130,463
149,003
119,431
142,458
165,485
127,056
154,696
182,336
167,162
134,749
199,576
142,627
119,999
211,311
150,738
193,236
235,735
159,090
206,952
254,814
161,598
214,408
221,003
176,463
235,558
294,654
185,670
250,689
315,701
195,130
266,267
337,404
205,012
282,434
359,855
215,111
299,074
382,917
225,762
316,310
406,857
236,746
334,121
431,49S
248,014
352,431
456,848
259,176
371,425
483,073
GRIP County Contrlbullon
Ro'e
% of New Hire. Elect GRIP
B...Une
50'~
66213%
6.45%
6.;45%
6.45%
6.72"'->
6.72%
6.72%
6.61%
6.61%
6.61%
6.31%
6.43%
6.48%
6.25%
6.36%
6.45%
6.12%
6.28%
6.40%
6.04%
6,24%
6.39%
6.06%
6.28%
6.45%
6.08%
6.33%
6.50%
6.10"10
6.36%
6.54%
6.12%
6.39%
6.57%
6.61%
6.13%
6.42%
6.14%
6.45%
6.63%
6.15%
6.47%
6.65%
6.16%
6.48%
6.61%
6.17%
6.50"10
6.69%
6.800/,
6.33%
6.63%
6.35%
6.65%
6.82%
6.35%
6.66%
6.83%
6.47%
6.75%
6.90%
6,81%
6.56%
6.95%
GRIP Funded R.ao
", .fNew Ill... Elect GRIP
B...lloo
50%
66213'~
108.22% 108.22% 108.22",
112.66% 112.66% 112.66%
113.98% 113.86% '113.73%
115.13% 114.83% 114.54%
115.39% 114.88% 114.40%
114.08'10 113.40% 112.18%
112.78% 111.96% 111.24%
111.60% 11 0.67% 109.88%
llO.S3%
109.50% 108.66%
109.50% 108.42", 101.56%
108.55% 107.43% 106.56%
101.66% 106.52% 105.67%
106.78% 105.66% ·104.85%
IOS.94%
104.85% 104.10%
105.13% 104.10"10 103.41%
104.33% 103.39% 102.78%
103.67% 102.81% 102.27%
103.02% 102.26% 101.80%
102.39'10 101.74% 101.36%
101.84% 101.30'10 101.00%
101.35'1, 100.92% 100.69%
RSPl'ol!!U
% of New Hire. Elect GRIP
Ba,elln.
50'~
662/3%
203,9&1
$
203,981
$
203,981
$
213,735
208,427
219,042
224,341
214,618
234,064
235,650
221,542
249,157
265,716
228,636
247,116
258,712
235,685
281,139
298,057
210,417
242,778
282,143
314,551
249,129
331,180
293,808
256.436
305,576
348,074
263,077
317,252
269,391
365,114
328,947
215,542
382,352
340,854
281,759
399,950
352,134
417,152
287,715
435,884
364,747
293,610
376,939
454,361
299,511
389,404
473,301
30S,501
402,538
493,086
311,990
513,441
416,067
318,692
534,500
430,084
325,667
556,136
444,487
332,839
County Conlributlon
DoUan
(RSP and
G!Y!)
,~
ofNewlllre. Elect GRIP
662/3%
B...llne
50%
$
22,326 $
22,326
S
22,326
21,913
21,913
21,913
23,356
23,504
23,430
24,142
24,931
24,834
26,393
26,280
26,512
28,108
27,830
21,965
29,584
29,427
29,750
31,354
31,175
31,542
33,147
33,360
32,944
34,958
35,196
34,728
36,801
36,544
37,065
38,962
38,669
38,382
40,884
40,560
40,242
42,852
42,498
42,148
44,858
44,471
44,087
46,486
46,907
46,066
49,333
48,881
48,425
51,036
50,542
51,526
53,791
53,262
52,728
56,391
55,249
55,824
57,802
59,029
58,421
®
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ExhibitB
Actuarial Assumptions and Methods
The assumed rate of price inflation is 3.00%.
The assumed rate of investment return used for the GRIP was 7.50%, net of expenses,
annually.
The rates of annual salary increase used for individual members are in accordance with the
following table. This assumption is used to project a member's current salary to the salaries
upon which benefit amounts will be based.
Salary Increases
Service
0
5
10
15
20
25
30
Public Safety
9.25%
8.25%
6.25%
5.50%
5.00%
4.50%
4.25%
Non-Public Safety*
6.00%
6.00%
6.00%
6.00%
4.25%
4.00%
4.00%
*
Includes GRIP
The assumed rate of total payroll growth is 4.00%.
Rates of separation from active membership are represented by the following table (rates do not
apply to members eligible to retire and do not include separation on account of death or
disability). This assumption measures the probabilities of members terminating employment.
Service
0
1
2
3
4
5
6
7
8
Over 8 years
GRIP
9.500%
9.500%
6.000%
6.000%
5.000%
4.250%
3.000%
3.000%
2.500%
2.500%
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Exhibit B
Rates of disability were as follows:
GRIP
Age
20
25
30
35
40
45
50
55
60
Male
0.0975%
0.1800%
0.2475%
0.2925%
03300%
0.5880%
0.7080%
0.5400%
0.8625%
Female
0.0375%
0.0975%
0.1800%
0.2550%
03150%
03375%
0.5100%
0.5800%
0.5625%
Rates of retirement for members eligible to retire
during
the next year were as follows:
GRIP
Age
Under 59
59
60
61
62
63
64
65
66
67
68
69
70
Rate
0.00%
0.00%
5.00%
5.00%
15.00%
15.00%
15.00%
40.00%
40.00%
40.00%
40.00%
40.00%
100.00%
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Exhibit B
The mortality table used to measure retirement mortality was based on the RP2000 Mortality
Table, sex-distinct, projected to the year 2030 for healthy mortality and projected to the year
2010 for disabled mortality. Rates are set forward five years for the disabled mortality
assumption. The healthy mortality assumption is used to measure the probabilities of members
dying before retirement and the probabilities of each benefit payment being made after
retirement. We expect that because the mortality table is projected to the year 2030, this
provides a margin for future mortality improvement.
Healthy Morta6ty
Future
Life
Disabled Mortafity
Future
Life
Age
.25
30
35
40
45
50
55
60
65
70
75
80
Mortafity Rate
Women
Men
0.0278%
0.0382%
0.0665%
0.0848%
0.1018%
0.1240%
02038%
0.4159<'/0
0.8344%
1.4111%
2.4785%
4.7613%
0.0136%
0.0195%
0.0341%
0.0449<'/0
0.0693%
0.1002%
02135%
0.4349%
0.8351%
1.4405%
2.2088%
3.7161%
Expectancl
(yeal'Sl
Women
Men
Mortafity Rate
Men
Women
0.0422%
0.0735%
0.0996%
0.1323%
0.1783%
0.2991%
0.5742%
1.1062%
1.9091%
32859%
5.8213%
10.3244%
0.0239%
0.0425%
0.0607%
0.0957%
0.1412%
02507%
0.4808%
0.9231%
1.5923%
2.5937%
4.2767%
7.2923%
Expecta~
Men
51.06
46.19
41.38
36.59
31.85
27.17
22.66
18.44
14.60
11.12
8.13
5.75
(yeal'Sl
Women
53.61
48.69
43.81
38.96
34.16
29.44
24.89
20.61
16.69
13.15
10.00
7.31
57.94
53.03
48.15
43.33
38.51
33.71
28.94
24.32
19.94
15.89
12.11
8.79
59.71
54.76
49.83
44.91
40.03
35.18
30.40
25.81
21.49
17.51
13.86
10.54
For this analysis, sex was not given for current RSP members, therefore, pre-retirement mortality
was based on male only mortality rates.
Benefit Service:
Exact fractional years of service are used to determine the amount of
benefit payable.
All decrements are assumed
to
occur at the beginning ofthe year.
Decrement Timing:
Decrement
Operation:
Turnover decrements do not operate after the member reaches
retirement eligibility.
Eligibility Testing:
Eligibility for benefits is determined based upon the age nearest
birthday and service on the date the decrement is assumed to occur.
Pay
Increase Timing: End of (fiscal) year.
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ExhibitC
Benefit Provisions
Guaranteed Retirement Income Plan
(efftctive
711/2009)
A. Eligibility for GRlP entry:
• Full-time non-public safety employees hired on or after July 1, 2009 who do not
participate in the retirement savings plan may make a one-time irrevocable election
to
participate in the GRIP within the flrst 150 days of full time employment.
• Part-time or temporary non-public safety employees hired on or after October 1,
1994 who do not participate
in
the retirement savings plan may make a one-time
irrevocable election to participate in the GRIP after at least 150 days of
employment
B. The GRIP account collects:
• Member contributions (pre-tax unless noted otherwise)
a. Non-public safety employees: 4% of regular base earnings up to the maximum
Social Security wage base plus 8% of the excess.
b. Public safety employees: 3% of regular base earnings up to the maximum
Social Security wage base plus 6% ofthe excess.
c. Effective July 1, 2011 members may contribute an additional 2% of regular
earnings for service between June 30, 2011 and July 1, 2012, on an after-tax
basis by making an election in writing on or before September 1,2011.
• Employer contributions
a
Non-public safety employees: 8% of regular base earnings. Effective July 1,
2011, the employer contribution is 6% of regular base earnings for service
between June 30, 2011 and July 1, 2012.
b. Public safety employees: 10% of regular base earnings. Effective July 1, 2011,
the employer contribution is 8% of regular base earnings for service between
, June 30, 2011 and July 1, 2012.
• 7.25% interest credited from the date of contribution.
C. Vesting Schedule:
• Employees are 100% vested in employee contributions at all times.
• County contributions are 0% vested from 0-3 years of credited service and 100%
vested at 3 or more years of credited service.
• Participants become 100% vested at death or disability.
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Exhibit C
D. Normal Form ofPayment-Lump sum
E. Optional Forms ofPayment:
Direct rollover
Life annuity purchased from an insurer
F. Eligible Agencies:
CC - credit union employees (outside agency)
CM - union employees (represented)
CN - non-bargaining employees (non-represented)
CP - public safety employees
CZ - elected officials who transferred from the EOP
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GRS
March 11,2015
Gabriel Roeder Smith
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Consultants
&
Actuaries
20 North Clark Street
312.456..
9800
phone
Suite 2400
Chicago.
IL 60602·5111
312.456•.9801 fax
www.gabrielroede:r.com
Ms. Linda Herman
Executive Director
Montgomery County Employees' Retirement System
Rockville, Maryland
Subject:
Dear Linda:
Cost Impact of DROP Proposal for Group E (Uniformed MCGEO Only)
As requested, we have measured the cost impact to the Montgomery County Employees'
Retirement System (ERS) ofthe following proposal to change benefit provisions for current
active Uniformed MCGEO Group E employees.
• Implement a DROP with an interest crediting rate based on actual investment
performance of a self-directed DROP account
The proposed effective date ofthis change is July 1,2015, and the change would only affect
members that are active as of that date.
The main provisions of the DROP would be the same as the current DRSP for Group F members
and include:
• Members may enter the DROP once minimum age and service requirements have been
met for normal retirement
o Age 55 with 15 years of credited service or age 46 with 25 years of credited
service
• The following amounts are accumulated in the DROP account and are credited actual
investment returns during participation in DROP:
o The accrued benefit frozen at time of DROP
• The DROP account does not collect COLAs granted during the DROP
period
• The maximum DROP period is equal to three years.
o Employees may opt out of DROP annually at their anniversary of entering DROP
• Upon exit from DROP, the member receives:
o The monthly benefit amount equal
to
the frozen accrued benefit at time of DROP
plus the COLA increases granted during the DROP period, plus
o Distribution of the DROP account
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Ms. Linda Herman
Montgomery County Employees' Retirement System
Page 2
The illustrated cost impacts are shown in Exhibits
I -
IV:
.
• Exhibit
I -
Summary of DROP Scenarios
• Exhibit IT - Implement DROP, Scenario 1 Retirement Rates
• Exhibit
ill -
Implement DROP, Scenario 2 Retirement Rates
• Exhibit IV - Group E Contribution Rate Summary
The analysis includes the following assumptions and methods:
• Members will enter the DROP earlier than when they are currently assumed
to
retire
under the current provisions. Two alternative sets ofDROP/retirement rates were used in
the analysis and are shown in Appendix
I.
These rates assume that members will exit .
DROP and commence normal retirement later
than
currently assumed.
• 70% DROP participation rate, which is the same assumption currently used for Group F
andGroupG.
• Members will participate in the DROP for the maximum period oftime (three years
under the proposal) and extend their careers on average by exiting DROP approximately
1.0 year or 1.5 years later than under the current provisions with no DROP.
• The other assumptions and methods as used and disclosed in the actuarial valuation as of
July 1, 2014.
The data is summarized in Appendix II. We have assumed that all active uniformed MCGEO
members of Group E would be affected by the change (ifthey meet the eligibility conditions).
Summary of Results
Implementing a DROP for Group E uniformed MCGEO members is expected to increase the
actuarial liabilities and contribution requirements ofthe System based on the assumptions used.
The cost of the DROP is significantly affected by how member retirement behavior changes as a
result of implementing the DROP.
If
members commence retirement benefits sooner (by the
benefit amount being deposited into the DROP account), costs are typically expected
to
increase.
Exhibit
I
contains a summary ofthe key results for the two DROP scenarios included in this
analysis and the results if 100% of members entered DROP or retired at Ill'st eligibility for
retirement. The 100% scenario was provided in order to give a high-end estimate on what the
additional cost might be.
The following table summarizes the increase in costs of implementing a DROP for the indicated
groups:
Increase in first
year
costs
Group and Scenario
Uniformed MCGEO - Scenario 1 Rates
Uniformed MCGEO - Scenario 2 Rates
1
$
Funding
1
Accounting
2
230,505
$
2,805,524
85,825
1,631,042
Increase in first
year
County contnbution (total cost amortized over 20
years).
Increase in GASB 68 pension expense (total cost inn:nediately recognized).
2
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Ms. Linda Hennan
Montgomery County Employees' Retirement System
Page 3
Below is a summary ofthe key results for the two DROP scenarios included
in
this analysis and
the results if 100% of members entered DROP or retired at first eligibility for retirement The
100% scenario was provided in order to give a high-end estimate on what the additional cost
might be.
.
100%
DROPlRetirement at
FirstEigibility
$
90,581,379
8,154,735
35.80%
UoiformedMCGED
Active Actuarial Accrued
Uability
County Contribution RequireJrellt
$
County Contribution RequireJrellt
%
(Includes Retirement Incentive)
Average Age at RetireJrelltIDROP
Average Age at Retirement'"
Number ofRetirementIDROP FJrSt Year
TotalF.RS
Funded Ratio (Actuarial Value ofAssets)
Baseline
DROP Scenario 1 DROP Scenario 2
$
83,638,135
$
86,443,659
$
85,269,117
7,693,023
7;123,5'}1,
7,778,848
3274%
33.45%
31.8S0Al
55.5
55.5
11
84.20%
54.4
56.5
16
84.14%
55.0
57.1
15
84.17%
53.3
55.4
28
84.05%
•Assumes 70% of members retire 3 yesrs after enteringDROP.
The following provision of the DROP is cost neutral based on the current actuarial assumptions
when a member remains in the DROP compared to retiring:
• Interest crediting equal to actual investment perfonnance of a member-directed DROP
account because the member bears the investment risk
The following provision ofthe DROP decreases costs when a member remains in the DROP
compared to retiring:
• COLAs are not payable during the DROP period
Additional implications of implementing a DROP:
• A lower payroll base on which both County and member contributions are made as a
result of an increase in total members participating in the DROP at a given time. (The
total active member payroll which includes DROP and non-DROP members would be
expected to remain the same, but the total non-DROP payroll would be expected to be
lower.)
o This means that the portion of the contribution rate to amortize the unfunded
liability may be higher, but the contribution as a dollar amount to amortize the
unfunded liability may not be substantially different.
Future actuarial measurements may differ significantly from the current measurements presented
in this cost analysis. due to such factors as the following: plan experience differing from that
anticipated by the economic or demographic assumptions; changes in economic or demographic
assumptions; and changes in plan provisions, contribution amounts or applicable law.
I
I
I
I
If
any ofthe provisions. underlying data or assumptions used in this analysis appear to be
incorrect or unreasonable. please let us know as soon as possible so we can update the analysis.
I
I
Gabriel. Roeder Smith
&
Company
{jj)
I
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Ms. Linda Hennan
Montgomery County Employees' Retirement System
Page 4
The signing actuaries are independent ofthe plan sponsor.
Lance Weiss and Amy Williams are members ofthe American Academy ofActuaries
(MAAA)
and meet the Qualification Standards ofthe American Academy ofActuaries to render the
actuarial opinion herein.
Please let
us
know
if
you have any questions or would like to discuss the results ofthis analysis
further.
Sincerely,
~~J
..,
Lance
J.
Senior Consultant
cc:
weis6.~.,
F.C.A., M.A.AA.
Amy Williams, A.S.A., M.A.AA.
Consultant
Mr.
Ryan Gundersen, Gabriel, Roeder, Smith, and Company
Mr.
Neil Nguyen, Gabriel, Roeder, Smith and Company
L:\c3323_MontgomeryCounty\20 ISlImpactStatemen1s\02Feb20_DROP\MCGEO]roposal_030920IS.docx
Gabriel Roeder Smith
&
Company
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Exhibit I
Cost Impact of DROP - Summary of Scenarios
Uniformed MCGEO Only
Actuarial Accrued Liability
Net Normal Cost
Amortization ofUnfunded Liability
County Contnoution Requirement
Average Age at RetirementIDROP
Average Age at Retirement*
Number ofRetirementlDROP First Year
(Includes Retirement Incentive)
Groul!E
Actuarial Accrued Liability
County Contnoution Requirement
$
County Contribution Requirement %
(hlcludes Retirement Incentive)
$
Baseline
DROP Scenario 1
83,638,135
$
86,443,659
$
6,622,219
6,632,597
2,655,300
2,843,954
7,693,023
7,923,528
55.5
54.4
55.5
56.5
11
16
Impact
U
DROP Scenario 2
.
Impact"
2,805,524
$
85,269,177
$
1,631,042
10,378
6,571,879
(50,340)
188,654
2,764,978
109,677
230,505
7,778,848
85,825
-1.1
55.0
-0.5
1.0
57.1
1.6
5
15
4
100%
DROPlRetlrement
atFirstmlgil>ility _ ..l!!!\JI!ct**
$
90,581,379
$
6,943,244
6,520,942
(101,277)
3,122,190
466,890
8,154,735
461,712
53.3
-2.2
55.4
-0.1
28
17
$
165,611,776
$
12,587,119
31.98%
168,417,300
$
12,817,624
32.93%
2,805,524
$
230,505
0.95%
167,242,818
$
12,672,944
32.51%
1,631,042
$
85,825
0.53%
172,555,020
$
13,048,831
34.30%
6,943,244
461,712
2.32%
TotalERS
Actuarial Accrued Liability
$
Funded Ratio (Actuarial Value ofAssets)
3,958,929,718 $
84.20"10
3,961,735,242 $
84.14%
2,805,524
$
-0.06%
3,960,560,760 $
84.17%
1,631,042
$
-0.03%
3,965,872,962
$
84.05%
6,943,244
-0.15%
• Assumes 70% of members retire 3 years aftl:r entering DROP .
•• The change in the actuarial accrued liability and the net normal cost is the change
in
the GASB 68 pension expense accoWlting cost. The change in the CoWlty contribution requirement
is
the change
in
the first
year funding cost (total costs are amortized over 20 years).
(t>
Gabriel Roeder Smith
Be
Company
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Exhibit II
Cost Impact
of
DROP
­
Scenario 1 Retirement Rates
Valuation ..
Uniformed
MCGEO
orJul~1,2014
Iml!!!:'.
DROP Scenario 1
Uniformed
MCOEO
Uniformed
MCGEO
OtauSt
Total Oroue B
TotalERS
%
ofP!!rroll
Tolal
Grou2
B
TolalERS
o/,ofPaXroll
Tolal
Grou2
E
TolalERS
%
of Pay roll
Total All Plans
Actuarial Accrued LIability
ActiVe Members
DRSPIDROP Members
Terminoted V
..ted Member.
Retired Members end Beneftciarie.
Total
Centribution Basla Poyroll:
For
Norrml
Ce.t
Par Amortimtion ofUnfunded Uability
ACluarial Value ofAssets
UnfUnded Actuarial Aecrued Uobility
Funded Ratio (Actuarial Value ofA••ets)
Annual Oro.. Nooml Cest
Benellt.
&pen... ofAdministration
Total
Amortimtlon ofUnfUnded LIability
Annual Centribution Requirement:
Ceunty Portion
Eiq:lloyoe Portion
Total
Ceunty Public Sarety Centnbution
Amortization ofUnfunded Uability
Annual Centribution Raquire,rent:
Ceunty Portion
Jlrr4>loye. Portion
Totol
Ceunty Public Safaty Centribution
$
S
83,638,135
$
162,521,468
3,084,308
83,638,135
165,611,776
S 1,313,483,134
99,437,741
26,461,195
;459,547,645
3,958,929,718
$
86,413,659
$
165,332,992
$
1,376,288,658
$
2,805,524
$
2,805,524
$
2,805,524
3,084,308
86,413,659
168,417,300
99,437,741
26,461,195
a\.459.547,645
3,961,735,242
2,805,524
2,805,524
2,805,524
$
23,474,m
25,479,199
$
37,611,162
42,951,126
360,825,073
378,030,049
3,333,484,724
825,441,994
84.2%
$
23,007,948
25,012,994
$
37,141,957
42,484,921
360,358,868
377,563,844
S
(466,205)
(466,205)
$
(466,205)
(466,205)
$
(466,205)
(466,205)
3,333,484,724
628,250,518
84.1%
2,805,524
.{I.
1%
$
6,417,555
204,664
6,622,219
2,599,208
$
10,324,699
327,921
10,652,620
4,3S1,570
S
74,984,370
2,966,800
77,951,170
56,951,509
(20.78%)
(0.&2"/0)
f21.60%)
(15.07%)
S
6,427,933
204,664
6,632,597
$
10,335,077
327,921
10,662,998
$
74,994,748
;22!!.8OO
77,961,548
(20.81%)
(0.82%)
(21.63%)
$
10.,378
10,378
$
10,378
10,378
IS8,654
S
10.,378
1O,37S
(0.03%)
{O.OO%)
(0.03%)
S
$
$
S
Fr:cIlldinl!
Retirement incentive
2,787,862
S
4,570.,224
$
57,140,163
(15.13%)
$
188,654
$
$
IS8,654
(0.06%)
$
7,636,930
1,584,497
9,221,427
$
12,492,562
2,541,628
15,034,190
$
112,667,487
2:?:.235,192
134,902,679
76,256,907
59,111,574
(30.51%)
(6.16%)
(36.67'10)
$
7,867,435
1,553,024
9,420.459
$
12,723.067 .
$
2,51j1.155
15,233,222
$
112,897,992
2:?:.203,719
135,101,711
76,487,412
59,300,228
(30.60%)
(6.16%}
(36.76%)
$
230,505
(3I,473l
199,032
$
230,50.5
199,032
$
C!1.
473)
$
230,505
Ql,473
l
199,032
230,505
188,654
(0.09%)
(O.OCI'/o}
(0.09%)
$
Including RoUrement meentl ...
2,655,300
$
4,476,127
S
(15.64%)
$
2,843,954
$
4,664,781
$
(15.71%)
S
188,654
$
188,654
$
(0.07%)
7,693,023
1,584,497
9,277,520
$
12,587,119
2241 ,628
15,128,747
$
114,827,552
2:1,235,192
137,062,741
76,351,464
(31.08'/')
(6.16%l
(37.24%)
$
7,923,528
1,553,024
9,476,552
$
12,817,624
a\.S10,IS5
15,327,779
S
115,05S,057
22,203,719
137,261,776
76,581,969
(31.18%)
(6.16%l
(37.34%)
230,505
(31,473)
199,032
$
230,5OS
$
PI,
473l'
199,032
$
230.,505
Ql,473)
199,032
(0.100/0)
{O·OCI'/ol
(0.100/0)
S
$
230,505
Numbers may not add due to rounding.
@
Gabriel Roeder Smith
&
Company
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Exhibit III
Cost Impact of DROP - Scenario 2 Retirement Rates
VII/uatlo... or JU'l It 1014
1m1!!!£1- DROP St.llarl. 2
Unifom,ed
MCGEO
Uniformed
MCGEO
Chan,"
Unifonned
MCGEO
Total
AU
Plans
Actuarial Accrued LiabiUty
Active Members
DRSI'IDlilOP Melri>e..
Terminated Vested Melri>...
RetiflMi
MenDers and Beneficiaries
Total
Total
Grou2
E
TotalERS
%
ofPa:r:ro8
Total
Groue
E
TotalERS
%
ofPax mil
Total
Groue
E
Tot.IERS
%ofP.yroll
S
83,638,135
$
162,527,468
$
1,373,083,134
$
85,269,177
$
164,158,510
3,084,308
$
1,375,114,176
1,631,042
$
1,631,042
1,631,042
3,084,308
83,638,135
165,611,776
99,437,744
26,461,195
~4S9,547,645
99,437.744
26,461,195
~459,547,645
3,958,929,718
85,269,177
167,242,818
3,_,560,760
1,631,042
1,631,_
1,631,042
Contribution Bal is Pay roll:
ForNonllal COst
For Amortization ofUn!imded Liability
Actuarial Value ofAssets
Unfunded Actuarial Accrued Liability
Funded Ratio (Actuarial Value of As.et.)
Annual
Gron
NOJUIIl Cost
Benelitl
E"Jq)enses of Administration
Total
$
23,474,153
25,419,199
$
37,611,162
42,951,126
$
360,825,073
318,030,049
3,333,484,724
625,444,994
84.2'.4
$
23,081,741
25,086,787
31,218,150
42,558,714
$
360,432,661
377,637,637
3,333,484,724
627,l176,O36
84.l'Yo
(392,412)
(392,412)
$
(392,412)
(392,412)
S
(392,412)
(392,412)
1,631,042
0.0%
$
6,417,555
204,664
6,6<2,219
2,599,208
$
10,324,699
327,921
10,652,620
4,381,570
74,984,370
~966,800
77,951,170
56,951,509
(20.78%)
(O.82'
l t
l
(21.60%)
(15.l17%)
$
6,367,215
204,664
6,571,879
10,274,359
327,921
10,602,280
$
74,934,030
2:.~800
(20.19%)
$
(50,340)
(50,340)
109,677
$
(50,340)
(50,340)
109,677
(50,340)
(0.01%)
0
1
.00%1
(0.01%)
(0.04%)
77,900,830
(0.82%)
(21.61%)
(15.11%)
(50,340)
109,677
Amortization oCUnfunded Liability
Annual Contribution R,.equ1rement:
County Portion
$
$
Ettlutllng Retiremen!
In..
ntl.....
2,708,885
$
4,491,247
$
57,061,186
$
$
$
7,636,930
1,~497
Employ.. Portion
Total
COunty Public Salllty COntribution
Amortization ofUnCundod Liability
Annual COntribution lWjuiremellt:
C<>unty Portion
Employee Portion
Total
COunty Public Safety COntribulion
9,221,427
12,492,562
:!,S41,628
15,034,190
112,661,487
22,235,192
134,902,619
76,256,907
(30.51%)
6
1
. 1
6''1'2
(36.67%)
7,722,755
1,558,009
9,280,764
$
12,578,387
:!,SIS,140
15,093,521
$
112,753,312
E.208,704
134,962,016
(30.56%)
,6.16%1
(36.72%)
85,825
2!!,4881
59,337
$
85,825
26
1
,488
l
59,337
$
85,825
(2!,!.0881
59,337
&S,825
(0.05%)
(O·OO%l
(0.05%)
2,655,300
4,416,121
59,111,574
(15.64%)
76,342,732
$
Inc1udlnl Retirement Incentlft
2,764,978
$
4,585,804
$
59,221,251
(15.68%)
$
109,677
109,677
$
109,677
(0.04%)
7,693,023
1,584,497
9,277,520
$
12,587,119
2,541,628
15,128,747
114,827,552
E.235,192
137,062,744
76,351,464
(31.08%)
6
1
.16%1
(37.24%)
7,778,848
1,558,009
9,336,857
1:1,672,944
2,515,140
15,188,084
$
114,913,377
22,208,704
137,122,081
76,437,289
(31.13%)
16.16%1
(37.29%)
$
85,825
(26,48
!l
59,337
85,825
(26,4881
59,337
$
85,825
Q6,08
!l
59,337
85,825
(0.05%)
(000%)
(0.05%)
Numbers may not add due
to
rounding.
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Exhibit IV
Contribution Rate Summary - Group E
GroupE
Valulltion as of
Julyl,2014
Impact-DROP
Scenario 1
Impact - DROP
Scenario 2
County Contribution Requirement
($)
(Includes RetirementIncentive)
Unifonned MCOEO
$
7,693,023
$
12,587,119
Total Group E
Change
in
Total Group EContribution from the Valuation
County Normal Cost Contribution Re quire me nt
('Yo
ofPayroll)
Uniformed MCGEO
21.46%
Total Group E
21.57%
Change
in
Total Group ERate from the Valuation
0.00'10
County Contribution Requirement
('Yo
ofPayroll)
(Excludes Re tirement Ince ntive)
Uniformed MCGEO
Total Group E
Change
in
Total Group ERate from the Valuation
County Contribution Requirement
('Yo
ofPayroll)
(Includes Retirement Incentive)
Unifonned MCGEO
Total Group E
Olange
in
Total Group ERate from the Valuation
7,923,528
12,817,624
230,505
22.08%
21.95"10
0.38%
$
7,778,848
12,672,944
85,825
21.72%
21.73%
0.16%
31.66%
31.76%
0.00'/.
33.23%
32.71%
0.95%
32.52%
32.28%
0.52%
31.88%
31.98%
0.00'10
33.45%
32.93%
0.95%
32.74%
32.51%
0.53%
Numbers may not add due to rounding.
~
Gabriel Roeder Smith
&
Company
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Appendix I
Group E Retirement Rates
Valuation Rates
lst Elig. For Ultimate
Age NonnalRet Rate
3.50% 3.50%
Under
45
46
15.00% 8.00%
47
15.00% 8.00%
48
15.00% 8.00%
15.00% 8.00%
49
20.00% 10.00%
50
51
20.00% 10.00%
52
20.00% 18.00%
20.00% 18.00%
53
54
20.00% 18.00%
55
50.00% 50.00%
50.00% 50.00%
56
57
50.00% 50.00%
58
50.00% 50.00%
59
50.00% 50.00%
100.00% 100.00%
60
Drop Scenario 1
GrouEE
1st Elig. For
Nonnal Ret
3.50%
40.00%
40.00%
45.00%
50.00%
55.00%
65.00%
70.00%
75.00%
80.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Ultimate
Rate
3.50%
8.00%
8.00%
8.00%
8.00%
10.00%
10.00%
18.00%
18.00%
18.00%
50.00%
50.00%
50.00%
50.00%
50.00%
100.00%
Drop Scenario 2
lst Elig. For Ultimate
NonnalRet
Rate
3.50%
3.50%
15.00%
8.00%
15.00%