GO Item 4
April 23, 2015
Worksession
MEMORANDUM
April 21, 2015
TO:
FROM:
Government Operations and Fiscal Policy commi/7
Robert
H.
Drummer, Senior Legislative Attorney
n
('rit;I
SUBJECT:
Worksession:
Expedited Bill 20-15, Deferred Retirement Option Plan-
Amendments - Retirement Savings Plan-Annuity - Guaranteed Retirement Income Plan­
Election
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 public hearing is tentatively scheduled for May 5 at 1:30 p.m.
Bill 20-15 would:
(1)
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.
(2)
(3)
(4)
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.
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
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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.
Issues
1. What is the fiscal and economic impact of the Bill?
OMB submitted a fiscal and economic impact statement for each provision of the 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-revokable 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 of the GRIP. The employee bears the investment risk for members
of the 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 of employees in the GRIP, the fiscal impact depends entirely on the
investment returns in the ERS Trust Fund. If they 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.
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(b)
RSP Annuity.
Under current law, a member of the GRIP can choose to receive his
or her account balance upon retirement in the fonn 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 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 of this
change. See
<052-54.
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.
DROP for Deputy Sheriffs and Uniformed Correctional Officers.
OMB estimated
a one-time $50,000 cost to implement the new DROP. See
<018.
OMB attached
a report from GRS analyzing the potential fiscal impact of the new DROP. See
<032-51.
The Council's Office of Legislative Oversight analyzed the GRS report
to provide additional infonnation 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
(c)
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 of the actuary report as follows:
OLO fmds 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 of the 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.
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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 of the increased risk from the GRIP and the
potential 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 of these 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.
Council staff recommendation:
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.
Council staff recommendation:
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 of
employment 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
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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's 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 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 intitial
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." See lines 134-136 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 defined 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% of salary for employees in the RSP and the GRIP, but 38-40% of
salary for employees in the ERS. (Few private sector defmed 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
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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, 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
8. 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)
(c)
Enact the Bill as introduced.
Reject the DROP for the deputy sheriffs, uniformed correctional officers, or both.
Remove some or all ofupper management from the DROP, such as the Director
ofCorrections.
Reduce the maximum period of participation.
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.
(d)
If the Council rejects any part of the Agreement (options b or d), the Executive and
MCGEO would have 10 days from the adoption of the 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.
If the 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 134-136, "when the
An employee hired as a Department Director from outside the County would not be eligible for the ERS or the
DROP.
1
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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.
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
OLO Fiscal Impact Analysis
Tom Lowman Analysis
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Circle #
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69
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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: April 16, 2015 Draft No. 4..:.....-_
Introduced:
April 21. 2015
Expires:
October 21,2016
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date:
-'N.!.>o~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
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.
2
3
4
5
6
(a)
Full-time employees.
(l)
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 of the State, or the County.
(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:
(A) the integrated retirement plan, if the employee is eligible
for membership in the integrated plan;
(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
Section 33-115; or
(C) the guaranteed retirement income plan if the employee is
eligible for membership and [elects to]
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;
IS
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participate~
as
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eligible for
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®
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Expedited Bill No. 20-15
28
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(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
31
32
33
(C)
the guaranteed retirement income plan if the employee is
eligible for membership and [elects to participate]
participates as described in subsection (k).
34
35
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(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:
(A)
the integrated plan, if the employee
membership in the integrated plan;
(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 I, 1994 and elects to participate as described
in Section 33-115; or
IS
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eligible for
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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] EligibilityfOr the guaranteed retirement income plan.
*
(3)
*
An
eligible full-time employee hired on or after July 1,2009 and
before July.L 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 offull
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.
*
(1)
*
*
A member of the Office, Professional and Technical (OPTlor
the Service, Labor and Trades (SL T) collective bargaining unit
must participate 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, ifthe employee:
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Expedited Bill No. 20-15
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(A)
is hired as
or
~
~
full-time employee on or after July.L 2015;
.em.
is
part time employee who does not participate in the
82
83
84
retirement savings plan and becomes
~
full-time employee
on or after July.L 2015.
Participation must begin on the first
~
period after an employee
has completed 180 days of full time employment.
85
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90
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92
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 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
~
93
94
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96
period after an employee has
A part-time
completed 180 days of full-time employment.
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.
33-38A. Deferred Retirement Option Plans.
97
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*
*
*
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Expedited Bill No. 20-15
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131
l£)
DROP Plan for Sworn Deputy Sheriffs and Unitormed Correctional
Officers.
ill
Uniformed correctional officer
means Correctional Officer
1.
Correctional Officer
1.L
Correctional Officer III, Correctional
Dietary Officer
1.
Correctional Dietary Officer !L. Correctional
Supervisor-Sergeant,
Correctional
Dietary
Supervisor,
Correctional Shift Commander-Lieutenant, Correctional Unit
Commander-Captain, Deputy Warden, Warden and Director of
the Department of Corrections.
ill
Sworn Deputy Sheriff
means Deputy Sheriff
1.
Deputy Sheriff!L.
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
~
at
least 60 days before the employee becomes
~
participant.
An
employee may withdraw
~
pending application within
after submitting the application.
2
weeks
ill
Employee participation and termination.
The employee's
participation in the DROP must begin on the first day of
£!
month
®
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Expedited Bill No. 20-15
132
133
134
135
136
137
138
that begins at least 60 days, but not more than 90 days, after the
employee applied and must end
I
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.
139
140
141
142
143
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
144
145
contributions after that date.
An
employee who wishes to
146
147
148
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.
@)
149
150
151
152
153
154
155
Pension benefits.
CA)
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.
156
157
158
an
A pension benefit must not be paid to the employee while
the employee participates in the DROP, but must be
(!J
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Expedited Bill No. 20-15
159
deposited in
§:
DROP account established for the
160
161
participant
Qy
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.
(Q)
An
employee must direct the Board of Investment
162
163
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168
Trustees to allocate pension benefits contributed to the
employee's DROP account in one or more of the
investment funds selected
Qy
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.
@
169
170
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174
After the employee's participation in DROP ends, the
employee's pension benefit will be based on:
175
176
.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;
177
178
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180
(ii)
the employee's average final earnings, excluding
earnings during the period of participation in the
DROP; and
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184
(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
185
CD
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Expedited Bill No. 20-15
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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.
CA)
A
DROP participant who is eligible for
~
service­
connected disability retirement must choose either:
ill
(ii)
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.
ill.)
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 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.
.QQ)
Death benefit.
If an employee dies during the employee's
participation in the DROP, the employee's beneficiary
will
receIve:
212
.
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Expedited Bill No. 20-15
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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)(D); and
!ill
the balance of the employee's DROP account.
(ill
DROP account distribution options.
A member may have the
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 paragraph as allowed under the Internal
Revenue Code and applicable regulations.
33-44. Pension payment options and cost-of-living adjustments.
*
ill
*
*
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.
(l)
Full-time employees.
(A)
Except as provided in paragraphs (3), (4), [and (7)] and the
last sentence of Section 33-37(e)(2), a full-time 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
®
­
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Expedited Bill No. 20-15
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241
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253
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266
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
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 in the
Guaranteed Retirement Income Plan [and makes an
election under subsection (7)].
@
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Expedited Bill No. 20-15
267
268
269
270
*
*
Retirement Income Plan.
*
(7) [Election to participate] Participation m the Guaranteed
(A) [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. Ifan 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 must participate 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:
271
272
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290
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®
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Expedited Bill No. 20-15
294
295
296
ill
is hired as
~
full-time employee on or after July
L
2015; or
(ii) is
~
part time employee who does not participate in
the Retirement Savings Plan and becomes
time employee on or after July
L
2015.
Participation must begin on the first
ImY
period after an
employee has completed
employment.
180 days of full time
~
297
298
full­
299
300
301
302
303
304
CB)
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
ImY
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
~
305
306
307
308
309
310
311
312
313
full-time employee must continue to participate in the
same retirement plan.
314
©
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
Income Plan any time after the employee has completed
150 days of employment.
(b)
Participants groups and eligibility.
315
316
317
318
319
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Expedited Bill No. 20-15
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336
337
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346
(B)
(1)
Group
1.
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)
(ii)
(iii)
is not represented by an employee organization;
does not occupy a bargaining unit position;
is not a public safety employee; and
does not elect to participate
in
the Guaranteed
Retirement Income Plan; or
(iv)
(i)
(ii)
is not a public safety employee; and
is subject to the terms of a collective bargaining
agreement between the County and an employee
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
@
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Expedited Bill No. 20-15
347
348
349
350
351
352
353
(iii)
[does not elect] elects to participate in the
Retirement Savings 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.
354
355
356
357
*
358
359
360
361
362
363
ill
Optional method
*
*
91
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).
*
*
*
364
365
366
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.
367
368
Approved:
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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:
Department of Finance
N/A
N/A
SOURCE OF
INFORMATION:
Linda Herman, Executive
Employee Retirement Plans
Shawn Stokes, Director, OHR
APPLICATION
WITHIN
MUNICIPALITIES:
N/A
PENALTIES:
NI
A
Director,
Montgomery
County
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-
?tl5;'PR 16 /ii19:3ij
OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLE, MARYLAND 20850
Isiah Leggett
County Executive
MEMORANDUM
April 7, 2015
MotHGOMtRYCOutHY
COUNC1L
RECElVED
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
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·.1
.. i
.
.
..
[
.:
Fiscal Impact Statement
Expedited Council Bill XX-1S Retirement - Employees' Retirement System Deferred
Retirement Option Plan - Amendments - Retirement Savings Plan
"7
Guaranteed
Retirement 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 $1 0,000. Additionally. the implementation of
the RSP annuity offering will require one time programming changes to PeopleS oft, 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 bill 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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.
.
,
,
As
mentioned in
#2,
there is a total one-time imp.act of
$20,000
to make payroll changes,
~d
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 ofthe staff time needed to implement the bill.
No additional
staff
time will be required to implement the bill.
8.
An
explanation of how the addition ofnew staff responsibilities would affect other duties.
No additional staffrespoDsibilities 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 of revenue 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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.i
.. !
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 unifonned 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 of information
is
from the staff ofthe 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 of costs is based upon projections including participation rates (DROP),
life expectancies (RSP annuity offering), investment earnings (GRIP) and other
demographic assumptions from the actuarial analysis. lfthe 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 of various 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
Hagedoorn, Finance; Linda Hennan, Executive Director, Montgomery County
Employee Retirement Plans.
Page
I
of2
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.1
·1
Economic Impact Statement
Bill ##-15, Retirement - Employees' Retirement System - Deferred Retirement
Option Plan - Retirement Savings Plan -Guaranteed Retirement Income Plan - .
Election - Annnity
Department ofFirumce
Page2of2
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GRS
March 19,2015
Gabriel Roeder Smith
&
Company
Consultants
&
Actuaries
10 North Clark Street
Suite 1400
Chicago,
IL
60602-5111
312.456.9800 phone
312.456.9801
fax
www.gabrielroedet.rom
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 ofthe 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).
New Hires Elect GRIP
Scenario
Baseline - 33
113%
Elect GRIP
50% Elect GRIP
662/3% Elect GRIP
Pereen~geofNew
Pereen~geofNew
Hires Electing GRIP Hires Electing RSP
33 113%
50%
662/3%
662/3%
50%
33113% .
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 arid 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 of July 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 endiIig 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, termination 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 pmposes 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 7.3 0% 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 ofaltemative investment
return scenarios occurring. However, stochastic projections were outside the scope ofthis
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 Smith
&
Company
@
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Ms. Linda Hennan
Montgomery County Employees' Retirement System
March 19,2015
Page
3
If
any of the 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 of the plan sponsor.
Lance Weiss and Amy Williams are Members ofthe American Academy ofActuaries
(MAAA)
and meet the Qualification Standards ofthe American Academy of Actuaries 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.
Smcerely,
~~~~
Weiss,~~
FCA, MAAA
I
thvyZc/~
Amy Williams, ASA, MAAA
Consultant
Lance
J.
Senior Consultant
LW/AW:mrb
Gabriel Roeder Smith
&
Company
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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%
..g
105.0%
..@!iJ,"li'l!l!'JI't"IIII!.
=
~
I
j ' . '.
'I,
11
,.'~
iiil,! .
i~1
'd
:L ': :
95.0%
~~
." 100.0%
ta
~
--il----l
r.
'.'.1
!.~IIJ-m,HrIIJit.hf.dJ-d1I-w.drEl'liJ-g;1'I1 dlJ~~'1
1.
·.'IH·
)---:J-~
-."
i-------.(;:~-----l"i--:":.--.;;,:------t'i____i
.· . '. ".
',."" "
•.
n
"'i
!-.'.
1.' .1.
..'
~.
~l
".'
t.'.'.~
.•
klL
·.··.1
1'
.
1
1
H "
.'
di!i-dI"l-mIlI"l .'
:,...
~
L".
!;!-!:r-----ict----i'''.
I
ill
J-IIIJ-III~i
n
·H".'
',1.--;,:
hl
.'
.
~;j
i
~
.
800010
i
6.00010
.t=
~
:!
U
4.00010
2,00010
85.0%
80.0%
75.0010
~
~
~
~
~
~
~
~
~
~
~
~
~
~
*
0.00%
Valuation Year/Fiscal Year Ending
®
Gabriel Roeder Smith
&.
Contpany
4
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Exhibit A
Montgomery County Employees' Retirement System
Projection Results ­ Comparison of GRIP Results Under Alternative Future Investment Return Scenarios
Results Based on July 1, 2014 Actuarial Valuation Bnd 33
IIJ%,
50% Rnd 66
2/3%
of New Hires Elect GRIP
Anume. Annuallnve.lmellt Retun. or7.S0%
(5 In IboUSOllds)
YeAr
Ended
Inl'eltment
~
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Return
17.66%
7.50%
7.50"/0
7.50%
7.50%
7.50%
7.50"/0
1.50'''
7.50'10
7.50%
7.50'10
7.50%
7.50'10
7.50%
7.50%
1.50%
7.50'10
1.50%
7.50%
1.50%
7.50%
GRIP Active Member
Poeulntlon
% of New HI",. Elect GRIP
BRseline
50%
662/3%
1,263
1,263
1,263
1,346
1,544
1,445
1,409
1,154
1,581
1,465
1,942
1,703
1,516
2,114
1,815
2,269
1,562
1,916
1,604
2,008
2,413
2,546
1,641
2,094
1,676
2,671
2,173
1,707
2,786
2,241
2,895
1,736
2,316
1,162
2,379
2,996
3,089
1,786
2,437
1,808
3,176
2,492
3,256
1,828
2,542
1,847
3,331
2,589
1,863
2,631
3,399
3,461
1,878
2,669
1,892
2,705
3,517
1,904
2,737
3,569
1,916
2,767
3,617
GRIP Active Member Pftlroll
% of New Hire. Elect GRIP
BRuJine
50%
66l/3'10
83,226
$
$
83,226
$
83,226
90,508
95,816
101,124
97,399
107,121
116,844
104,484
l!
8,591
132,699
111,923
130,463
149,003
119,431
142,458
165,485
127,056
154,696
182,336
134,749
161,162
199,576
142,627
211,371
179,999
150,738
193,236
235,735
159,090
206,952
254,814
161,598
221,003
274,408
176,463
294,654
235,558
185,670
250,689
315,707
195,130
337,404
266,267
205,012
282,434
359,855
299,074
382,977
215,171
225,762
316,310
406,857
236,746
334,121
431,495
248,014
352,431
456,848
259,776
311,425
483,013
GRIP CoUllI)' Contribution
Rale
% orNe" HI",. Elect GRIP
BRuUne
50%
66
2/3'~
6,45%
6.45%
6•.45%
6.12'10
6.72'10
6.72'10
6.61'10
6.61%
6.61%
6.37%
6.43'10
6.48'10
6.25%
6.36%
6.45%
6.12'10
6.28%
6.40'10
6.04%
6.24'10
6.39%
6.06%
6.28%
6.45%
6.08%
6.33%
6.50%
6.10'/,
6.36%
6.54'10
6.12%
6.39%
6.57'10
6.42%
6.13%
6.61%
6.14',4
6.45%
6.63%
6.15'10
6.47'1,
6.65%
6.16%
6.48%
6.67'10
6.11'10
6.50%
6.69'10
6.33%
6.63%
6.80%
6.35'10
6.65%
6.82%
6.350/,
6.66'~
6.83%
6.47%
6.75'10
6.90%
6.56%
6.81'10
6.95%
GRIP Funded Ratio
% ofN.... Him. Ele.tGRIP
BRseUne
662/3%
50'~
108.22% 108.22% 108.22%
112.66'10 112.66% 112.66'10
113.98% 113.86% .113.73%
115.13'10 114.83% 114.54%
115.39% 114.88% 1I4.40',.
114.08'10 113.40% 112.78%
112.78% 111.96% 111.24'10
II 1.60% 110.67'10 109.88%
llO.53% 109.50% 108.66%
109.50% 108.42'10 107.56%
108.55% 101.43% 106.56%
107.66% 106.52'10 105.67%
106.78% 105.66% ·104.85%
105.94% 104.85%
104.10"1,
105.13% 104.10'10 103.41%
104.33'10 103.39% 102.78%
103.67% 102.81% 102.27%
103.02'10 102.26%
101.80"1,
102.)9% 101.74% 10L36%
101.84% 101.30%
101.00'/,
101.35% 100.92% 100.69%
RSPParroll
% of New Hire, Elect GRIP
662/3%
Bn.eUne
SO'~
$
203,987
$
203,981
203,987
$
213,735
208,427
219,042
224,341
234,064
214,618
249,757
235,650
221,542
265,716
247,176
228,636
258,712
281,739
235,685
270,417
242,778
298,057
314,557
282,143
249,729
256,436
331,180
293,808
305,576
263,077
348,074
317,252
269,391
365,114
328,947
275,542
382,352
340,854
281,759
399,950
417,752
352,734
287,715
364,747
293,610
435,884
299,517
454,361
376,93.9
473,307
389,404
305,501
402,538
311,990
493,086
513,441
416,061
318,692
430,084
534,500
325,661
444,487
556,136
332,839
Counl)' Contribullon DoUan (RSP .nd
GRIP)
.~
orNew Hit... Elect GRIP
662/3%
Bn.eUne
50'~
$
22,326
$
22,326
22,326
$
21,913
21,913
21,913
23,430
23,356
23,504
24,931
24,834
24,742
26,393
26,280
26,512
27,965
28,108
27,830
29,750
29,584
29,427
31,354
31,175
31,542
33,147
32,944
33,360
35,196
34,958
34,728
36,544
37,065
36,801
38,962
38,382
38,669
40,242
40,884
40,560
42,148
42,852
42,498
44,858
44,471
44,087
46,066
46,907
46,486
48,881
48,425
49,333
50,542
51,526
51,036
53,262
52,128
53,791
55,249
56,391
55,824
59,029
58,421
57,802
®
3/19/2015
Gabriel Roeder Smith
&.
Company
5
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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.
SelVice
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%
3/1912015
Gabriel Roeder Smith
&;
Company
6
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ExhibitB
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%
0.3300%
0.5880%
0.7080%
0.5400%
0.8625%
Female
0.0375%
0.0975%
0.1800%
0.2550%
0.3150%
0.3375%
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%
3119/2015
Gabriel Roeder Smith
&;.
Company
7
@
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ExhibitB
The mortality table used to measure retirement mortality was based on the RP2000 Mortality
Table~ sex-distinc~
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.
Healtlly Mortality
Future
Life
Mortality Rate
Expectanc;r (years
l
Men
Women
Men
Women
0.0278%
0.0382%
0.0665%
0.0848%
0.1018%
0.1240%
0.2038%
0.4159%
0.8344%
1.4111%
2.4785%
4.7613%
0.0136%
0.0195%
0.0341%
0.0449"/0
0.0693%
0.1002%
0.2135%
0.4349%
0.8351%
1.4405%
2.2088%
3.7161%
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
Disabled Mortality
Future
Life
Age
Mortality Rate
Men
Women
0.0422%
0.0735%
0.0996%
0.1323%
0.1783%
0.2991%
0.5742%
1.1062%
1.9091%
3.2859%
5.8213%
10.3244%
0.0239"/0
0.0425%
0.0607%
0.0957%
0.1412%
0.2507%
0.4808%
0.9231%
1.5923%
2.5937%
4.2767%
7.2923%
Expectan~
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
(years
1
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
,25
30
35
40
45
50
55
60
65
70
75
80
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 detennine 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 detennined based upon the age nearest
birthday and service on the date the decrement is assumed to occur.
Pay Increase Timing: End of (fiscal) year.
3119/2015
Gabriel Roeder Smith
l!G
Company
8
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Exhibit C
Benefit Provisions
Guaranteed Retirement Income Plan
(effective
71112009)
A.
Eligibility for GRIP 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 first 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% of the 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 1,201 L
• 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.
3119/2015
Gabriel Roeder Smith
&
Company
9
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Exhibit C
D. Nonnal Fonn ofPayment-Lump sum
E. Optional Fonns 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
3/19/2015
Gabriel Roeder Smith
&:
Company
10
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GRS
March 11, 2015
Gabriel Roeder Smith
&
Company
Consnltants
&
Actuaries
20 North Clark Street
Suite 2400
Chicago, IL 60602-5111
312.456..9800 phone
312.456.9801
fax
www.gabrielroedet.eam
Ms. Linda Hennan
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 Unifonned MCGEO Group E employees.
• Implement a DROP with an interest crediting rate based on actual investment
perfonnance of a self-directed DROP account.
The proposed effective date of this change is July 1,2015, and the change would only affect
members that are active as ofthat 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 nonnal 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 III - 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
1.
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
and Group G.
• Members will participate in the DROP for the maximum period of time (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 IT. We have assumed that all active uniformed MCGEO
members of Group E would be affected by the change (if they 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 of the 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 of the 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.
The following table summarizes the increase
in
costs of implementing a DROP for the indicated
groups:
Increase in first year costs
Qoup and Scenario
Uniformed MCGFO - Scenario 1 Rates
Uniformed MCGFO - Scenario 2 Rates
1
2
$
funding
1
Accounting
2
230,505
$
2,805,524
85,825
1,631,042
Increase
in
first year County contribution (total cost amortized over 20 years).
Increase in GASB 68 pension expense (total cost immediately recognized).
Gabrid Roeder .Smith
&
Company
33
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Ms.
Linda Herman
Montgomery County Employees' Retirement System
Page 3
Below is a sununary of the key results for the two DROP scenarios included in this analysis and
the results if 100% of members entered DROP or retired
at
frrst eligibility for retirement The
100% scenario was provided in order
to
give a high-end estimate on what the additional cost
might be.
.
100%
DROPlRedrement at
First EigilBIity
$
90,581,379
8,154,735
35.80%
UIiformedMCGID
Active ActuariaIAccrued
liability
County Contribution Requirement
$
County Contribution Requirement %
(Includes
Retirement
Incentive)
Average Age
at
RetirementIDROP
Average Age at
Retirement*
Number ofRetirementIDROP FlISt Year
TotaIERS
Funded
Ratio (Actuarial Value ofAssets)
DROPScenario 1 DROP Scenario 2
Baseline
83,638,135
$
86,443,659
$
85,269,177
$
7,!)23,52P.
7,778,848
7,693,023
33.45%
3274%
31.8S0A>
55.5
55.5
II
54.4
56.5
16
84.14%
55.0
57.1
15
84.l?OA>
53.3
55.4
2P.
84.05%
84.20%
•Assumes
70%
of members retire
3
years
after entering
DROP.
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 performance of a member-directed DROP
account because the member bears the investment risk
The following provision of the 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.
If
any of the 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.
Gabriel Roeder Smith
&
Company
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Ms. Linda Herman
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 of the 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,
cY~ J~
...
Lance
J.
Senior Consultant
cc:
weis6.~.,
F.C.A., M.A.A.A.
Amy
Williams,
A.S.A., M.A.A.A.
Consultant
Mr.
Ryan Gundersen, Gabriel, Roeder, Smith, and Company
Mr.
Neil Nguyen, Gabriel, Roeder, Smith and Company
L:\c3323_MontgomeryCounty\2015UmpactStatements\02Feb20YROP\MCGEO]roposaJ_03092015.docx
Gabriel Roeder Smith
&
Company
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Exhibit I
Cost Impact of
DROP
-
Summary of Scenarios
JJnif(lrme~l\1CGIi!>
QaiIy._ _.. _
Actuarial Accrued Liability
Net Nonna! Cost
Amortization ofUnfunded liability
County Contribution Requirement
Average Age at RetirementIDROP
Average Age at Retirement·
Number ofRetirementlDROP First Year
(hlc\udes Retirement Incentive)
Groul!E
Actuarial Accrued liability
County Contn'bution Requirement
$
County Contribution Requirement %
(Includes 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"
DROP Scenario
2
2,805,524
$
85,269,177
$
10,378
6,571,879
188,654
2,764,978
230,505
7,778,848
-1.1
55.0
1.0
57.1
5
15
Impact
U
1,631,042
(50,340)
109,677
85,825
-0.5
1.6
4
100%
DROP/Retirement
at First
Elglbility
.
Impact"
$
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%
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 after entering PROP .
... The change in the actuarial aocrued liability and the net normal cost is the change in the GASB 68 pension expense accounting cost. The change in the County contribution requirement is the change
in
the first
year
fWlding
cost (total costs are amortiud over 20 years).
(B
Gabriel Roeder Smith
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Exhibit II
Cost Impact of DROP - Scenario 1 Retirement Rates
Valuation so orJulllzlO14
Uniformed
MCXlEO
Uniformed
MCXlEO
Imr!!!:t-DROP Scenarl.l
Unifom.,d
MCXlEO
Ch81l2t
Total GroU2 E
TotalERS
%ofPa~ron
Total GroU!! E
TotalERS
%
ofPayroll
Tolal Group E
TotalERS
% ofPay mil
Total
An
Pla!1S
Actuarial Accrued Uability
Activ.Memb ....
DRSPIDROP MenDers
T.rminated Vest.d Members
Retired Members and Benefociari.s
Total
Contribution Besis Payroll:
For Normal Co.t
For Amorti2ation of Unfunded Uability
Actuarial Value of AUels
Unfunded Actuarial Accrued Uability
Funded
Ratio
(Actuarial Valu. ofA•••ts)
Annual Gross Nonrlll1 Cost
Benefit.
S
83.638.135
S 162,527.468
3.084.308
S 1,373.483.134
99.437.744
26.461.195
~459,547,645
$
86.443.659
$
165,332,992
$
1,376,288,658
$
2,805,524
$
2,805,524
$
2,805,524
3,084.308
86,443,659
168,417,300
99.437.744
26,461,195
~459,547,645
83,638.135
165.611,776
3,958,929.718
3.961,735,242
2,805.524
2,805,.524
2,BOS,S24
$
23,474,153
25,479,199
$
37.611.162
42,951,126
$
360,825.073
378,030.049
3,333,484,724
625,444,994
84.2%
S
23,007,948
25,012,994
S
37,144,957
42,484,921
S
360,358,868
377,563,844
3,333.484,724
628.250,518
84.1%
S
(466,205)
(466,205)
S
(466,205)
(466,205)
$
(466,205)
(466,205)
2,805,.524
-0.1%
S
&pens.s ofAdminiBtreUon
Total
Amorti2ation ofUnfunded Liability
Annual Contribution Requirement:
County Portion
l:liqJloy •• Portion
Total
County Public Safety Contribution
Amorti2ation ofUnfunded Liability
Annual Contribution Requirement:
County Portion
l:liqJloyee Portion
Total
County Public Safety Contribution
$
6,417,555
204,664
6,622.219
2,599.208
S
10.324,699
327,921
10,652,620
S
74.984,370
~966,800
17.951,170
S
56,951,509
(20.78%)
(0.82"Ao)
(21.60%)
S
6.427,933
204,664
6,632,591
S
10,335,077
321,921
10.662,998
S
74,994,748
2,966,800
11,961,.54S
(20.81%)
(0.82%)
(21.630/.)
(15.13%)
S
10,378
10,318
10.378
10,318
188,654
10,318
10,318
(0.03%)
(0·00%1
(0.03%)
$
$
4,381.570
(15.01%)
S
I!'xch,ding Retirement Incentlve
2,187,862
$
4.510,224 S
51,140.163
$
188.654
$
$
188.654
(0.06%)
S
7.636,930
1,584.497
9,221,427
$
12,492,562
~54I,6l8
S
112,661,487
~5,192
15,034,190
134.902,679
16.256.901
(30.51%)
{6.16%l
(36.61%)
S
1,867,435
1,553,024
9.420,459
S
12.123,061·
$
~510,155
15,233.222
112,891,992
22,203,719
135.101,711
(30.60'10)
(6.16%)
(36.16%)
S
230.505
(31,473)
199,032
$
230,505
$
(31,473
2
199.032
230,505
(3I,413
l
199,032
230,505
(0.09%)
(O.OO%)
(0.09'11)
2.655,300
$
4.416.127
$
59.11 1.574
(15.64%)
S
16,481.412
IncludinB Retirement incentive
59.300,228
2.843.954
$
4.664.781
$
(15.11%)
S
188.654
$
188,654
$
188,654
(0.07%)
S
7,1593,023
1,584,491
9,211,520
S
12,587,119
~541.628
15,128,147
S
114,821,552
22,!l5, 192
137,062,744
16,351.464
(31.08%)
(6. 16%l
(37.24%)
S
7,923,528
1,553,024
9,476.552
$
12,811,624
2,510,155
15,327.119
$
115,058.051
~203,719
131.261,116
16,581.969
(31.18%)
{6.l6%l
(31.34%)
$
230.505
(31,473)
199,032
$
230,505
$
(31,473 l'
199,032
23Q,505
Q1,473)
199,032
(O.1O'Ao)
(!!J)O%l
(0.10'11)
230,505
Numbers may not add due to rounding.
®
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Company
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Exhibit lIT
Cost Impact of DROP - Scenario 2 Retirement Rates
VRluRllon .. of July
I,
2014
Unillmned
MCGEO
Unifonned
MCGEO
Iml!!!c!-
DROP Sconarlo 2
Uniformed
MCGEO
Chanao
Total
Grou~
E
IotalERS
%oCPaxmll
Total Groue E
TotalERS
%
ofPayroll
Tot.1 GrouP E
TotalERS
% ofParmU
Tota! All Plans
Actuarial Accrued Liability
Active Memb.ra
DRSPIDROP Membe..
$
83,638,135
$
162,527,468
TeflTlinated Vested Men"bera
ReUred MambeB and Beneficiaries
Total
Contribution B ..
ia
Payroll:
For Nonnal Cost
For Amortization ofUnfunded Uability
83,638,135
3,084,308
165,611,776
1,373,483,134
99,437,744
26,461,195
:1,459,547,645
3,958,929,718
$
85,269,171
164,158,5tO
3,084,308
1,375,114,176
99,437,744
26,461,195
~459,S47,645
$
1,631,042
1,631,042
1,631,042
85,269,177
167,242,818
3,960,560,760
1,631,042
1,631,042
1,631,042
23,474,153
25,479,199
37,611,162
42,951.126
$
360,825,073
378,030,049
3,333,484,724
625,444,994
84,2"/0
23,081,741
25,086,787
37,218,750
42,558,714
360.432,661
377,637,637
3,333,484,724
627,076,036
84.2%
(392,412)
(:192,412)
(392,412)
(392,412)
(392,412)
(392,412)
Actuarial Value of AUels
Unfunded Actuarial Accrued Uability
Funded Ratio (Actuarial Value
oC
AUt")
1,631,042
0.0%
Annual
Oroll
Normal Cos
t
Benefits
EJcpens:e. of' Administration
Total
6,417,555
204,664
6,6~219
10,324,699
327,921
10,652,620
74,984,370
~966,8oo
77,951,170
(20.78%)
!!!.82"/,l
(21.60%)
6,367,215
204,664
6,571,879
10,274,359
327,921
10,602,280
74,934,030
2,966,800
77,900,830
(20.79%)
(0.82%1
(21.61%)
$
(50,340)
(50,340)
S
(50,340)
(50,340)
(50,340)
(50,340)
(0.01%)
0
1
.00%)
(0.01%)
Elt1udina Retirement In.:enthe
Amortization ofUnfunded Uability
S
2,599,208
S
4,381,570
$
56,951,509
(15.07%)
$
2,708,885
$
4,491,247
$
57,061,186
(IS. 11%)
109,671
109,677
109,677
(0.04%)
Annual Contribution Requirement:
County Portion
Employ.e Portion
Total
County Public Safety Collllibution
Amortization of Unfunded Liability
2,655,300
$
S
7,636,930
1,584,497
9,221,427
S
12,492,562
~541,628
S
15,034,190
112,667,487
22,235,192
1J4,902,679
76,256,907
59,111,574
(30.51%)
(6.16%)
(36.67%)
7,722,755
1,558,009
9,2So,764
12,578,387
~515,140
15,093,527
112,753,312
~,704
134,962,016
76,342,732
(30.56%)
6
1
. 16"10)
(36.72%)
85,825
85,825
~~488)
85,825
~6,4881
Q!!,
488
l
59,337
(0,05%)
(0.00%)
59,337
59,337
(0.0,,-,)
S
4,476,127
$
(15.68%)
109,677
109,677
85,825
109,677
(0.04%)
(15.64%)
JndudSng RetJrement
Jneend"
2,764,978
4,585,804
59,221,251
S
S
Annual Contribution Requirement:
County Pomon
Employ•• Portion
Total
Counly Public Safely Conllibution
7,693,023
1,584,497
9,277,520
12,587,119
2,541,628
15,128,747
114,827,552
22,235,192
137,062,744
76,351,464
(31.08%)
(6.16%)
(37.24%)
7,778,848
1,558,009
9,336,857
12,672,944
2,515,140
15,188,084
114,913,377
~,704
137,122,081
76,437,289
(31.13%)
(6.16"/0)
(37.29%)
85,825
~,488l
59,337
85,825
(26,488)
59,337
85,825
Q6,488
1
59,337
85,825
(0.05%)
(0,000/,)
(0.05%)
Numbers may not add due to rounding.
~
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&
Company
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Exhibit IV
Contribution Rate Summary - Group E
GroupE
Valuation
lIS
of
July1,2014
Impact· DROP
Scenario 1
Impact-DROP
Scenario 2
County Contribution Requirement
($)
(Include s Re tire me ntInce ntive)
Unifurm:d MCGEO
Total Group E
Change
in
Total Group EContribution from the Valuation
Unifurm:d MCGEO
Total Group E
Change
in
Total Group ERate from the Valuation
$
7,693,023
$
12,587,119
7,923,528
12,817,624
230,505
22.08"10
21.95%
0.38%
$
7,778,848
12,672,944
85,825
21.72%
21.73%
0.16%
County Normal Cost Contribution Requirement
(%
of Payroll)
21.46%
21.57%
0.00%
County Contribution Requirement
(%
of Payroll)
(Excludes Retirement Incentive}
Unifonned MCGEO
Total Group E
Change
in
Total Group ERate from the Valuation
31.66%
31.76%
0.00%
33.23%
32.71%
0.95%
32.52%
32.28"10
0.52%
County Contribution Require ment
(%
of Payroll)
(Includes Retirement Incentive)
Unifonned MCGEO
Total Group E
Change
in
Total Group ERate from the Valuation
31.88%
31.98%
0.00%
33.45%
32.93%
0.95%
32.74%
32.51%
0.53%
Numbers may not add due to rounding.
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Appendix I
Group E Retirement Rates
Valuation Rates
lst Elig. For
Age Normal Ret
Under 45
3.50%
46
15.00%
47
15.00%
48
15.00%
49
15.00%
50
20.00%
51
20.00%
52
20.00%
53
20.00%
54
20.00%
55
50.00%
56
50.00%
50.00%
57
58
50.00%
59
50.00%
60
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 1
GrouJ!E
1st Elig. For
Normal 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
Normal Ret
Rate
3.50%
3.50%
15.00%
8.00%
15.00%
8.00%
15.00%
8.00%
15.00%
8.00%
25.00%
15.00%
30.00%
15.00%
30.00%
23.00%
35.00%
23.00%
40.00%
23.00%
55.00%
75.00%
80.00%
55.00%
85.00%
55.00%
90.00%
55.00%
95.00%
55.00%
100.00%
100.00%
DROP rates apply to unifonned MCGEO employees only.
Rates of20% are added to the retirement rates above
in
the first year of implementation of the DROP for the DROP scenarios for members that have been previously eligible to retire.
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Appendix II
Data Summary
Valuation
lIS
oC Jul;l: 11 2014
Public Safe!):
Unifonned
MCGEO'
Total Group E
GroupF
GroupO
GRIP
Non-Public SafeL-
Grou12A
~H
Total
Total All Plans
Active Members
Number
AvemgeAge
Avemge Service
TotalBase Payroll
Contribution Basis Payroll:
For Normal Cost
For Arrmtization ofUnfunded Liability
DRSP/DROP Members
Number
Total Base Payroll
Total Benefits
Terminated Vested Members
Number
Total Benefits
Retired Members and Beneficiaries
Number
Total Benefits
Total Membelllhip
527
56.7
26.7
$
50,976,638
$
43,189,541
799
56.8
24.6
$
55,866,352
$
47,460.110
401
420
11.1
$
25,479,199
$
23,474,153
626
43.5
12.4
$
42,951,126
$
37,611,162
$
$
1,190
38.1
12.9
89,215,131
82,124,733
89,215,131
39
3,740,247
2,523,134
$
1,130
37.5
11.7
80,663,980
75,043,449
80,663,980
60
5,944,122
3,626,704
19
121.662
1,263
49.5
8.3
$
83,225,&68
$
75,396,078
83,225,868
5,535
45.7
14.5
$
402,899,096
$
360,825,073
378,030,049
$
38.979.842
42,994,102
25,479,199
42,951,126
$
99
9,684,369
6.149,838
403
2,360,255
$
68
751,726
$
88
740.739
$
26
334,743
$
35