Agenda Item 75
May 5,2015
Public Hearing
MEMORANDUM
May 1,2015
~
TO:
FROM:
County C o u n c i l ·
Robert H. Drummer, Senior Legislative Attorney
frvrj.
Public Hearing:
Expedited Bill 20-15, Deferred Retirement Option Plan-
SUBJECT:
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 Government Operations and Fiscal Policy Committee worksession was held on April 23.
Action is tentatively scheduled for May 21.
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 ofthe 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 ©
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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
D RO P 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.
GO Committee Worksession
Linda Herman, Executive Director, Board of Investment Trustees, 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.
2.
the 80/20 cost share for group insurance benefits in each Agreement; and
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.
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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
an irrevocable 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 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 of this 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
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 ©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
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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 ofthe 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 ©l.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 FYI7.
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 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 of the increased risk to the County from the GRIP,
the potential increase in fees charged by the administrator for the RSP due to less participants and
less money to be invested, and a belief that the RSP is the better choice for many employees. 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.
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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's
liability to
$4.1
million.
Small changes in employee behavior create large Changes in the County's
liability. Predictions ofemployee 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 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
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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 FYI6, the
County will contribute 8% ofsalary for employees in the RSP and the GRIP, but 38-40% ofsalary
for employees in the ERS. (Few private sector defined contribution plans offer an employer
contribution as large as 8%, and more than 40% ofprivate 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 ofthis 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, as
introduced 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
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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.
l
The Committee approved an amendment requested by the Executive (©80) that would prevent the
Director from beginning participation in the DROP after appointment as Director.
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 of
Corrections.
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.
(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 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.
On
April 28,
the Council adopted Resolution
No. 18-118 (©81)
indicating its intent
to approve each of the changes to the retirement plan in the MCGEO Agreement, including
the new DROP for deputy sheriffs and uniformed correctional officers.
The Committee also discussed the ability of an employee to return to County service after
the DROP period ends. The Committee agreed that the language in lines 134-136 of Bill 20-15,
"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, a central rationale for the DROP, management's ability to use it for succession
planning, would be lost and the cost to the retirement system would likely increase.
This packet contains:
Expedited Bill 20-15
Legislative Request Report
County Executive Memo
Fiscal and Economic Impact statement
Arbitrator Decision
I
Circle #
1
16
17
18
55
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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Sheriff Popkin letter
Gino Renne letter
OLO Fiscal Impact Analysis
Tom Lowman Analysis
CAOMemo
Resolution No. 18-118
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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 28, 2015 Draft No......_ _
5
Introduced:
April 21. 2015
Expires:
October 21, 2016
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _----:_ _ _ _ _ _- ­
Sunset Date:
....:N..:..:o=n:-='e-:----=~
_ __
Ch. _ _ Laws of Mont. Co. _ __
I
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]]
1<
* *
Heading or defined term.
Added to existing law
by
original
bilI.
Deletedfrom existing law
by
original
bilI.
Added
by
amendment.
Deleted from existing law or the bill
by
amendment.
Existing law unaffected
by bilI.
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.
(a)
Full-time employees.
2
3
4
5
6
(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 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] participatea 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;
IS
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8
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12
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15
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20
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eligible for
@
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Expedited Bill No. 20-15
28
(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
29
30
31
32
33
34
(C)
the guaranteed retirement income plan if the employee is
eligible for membership and [elects to participate]
participates as described in subsection (k).
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42
(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.
43
44
45
46
(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
1, 1994
and elects to participate as described
in Section
33-115;
or
IS
eligible for
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48
49
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
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 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
*
(1)
*
*
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 a one time irrevocable election to participate
in the retirement savings plan during the first 150 days of full
time employment, if the employee:
78
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Expedited Bill No. 20-15
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80
@
is hired as
or
~
full-time employee on or after July 1.,. 2015;
81
82
83
84
ill}
is
~
part time employee who does not participate in the
retirement savings plan and becomes
~
full-time employee
on or after July 1.,. 2015.
Participation must begin on the first
~
period after an employee
has completed 180 days of full time employment.
85
86
87
88
®
On or after July 1.,. 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
~
89
90
91
92
93
period after an employee has
A part-time
94
95
96
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
105
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118
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(£)
DROP Plan for Sworn Deputy Sheriffs and Uniformed Correctional
Officers.
ill
Uniformed correctional officer
means Correctional Officer L
Correctional Officer IL. Correctional Officer III, Correctional
Dietary Officer L Correctional Dietary Officer IL. Correctional
Supervisor-Sergeant,
Correctional
Dietary
Supervisor,
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 Sheriff
means Deputy SheriffL Deputy SheriffIL.
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
~equirements.
An
eligible employee must apply at
least 60 days before the employee becomes
!!
participant. An
employee may withdraw
~
pending application within
after submitting the application.
2
weeks
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132
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134
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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
1
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.
(Q)
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.
142
143
144
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
145
146
contributions after that date.
An employee who wishes to
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
of
the
employee's participation.
149
150
151
152
153
®
Pension benefits.
(A)
Before an employee's participation begins, the employee
must select a:
154
155
156
157
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.
(3
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Expedited Bill No. 20-15
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162
163
164
165
166
167
168
169
170
171
ill}
A pension benefit must not be paid to the employee while
the employee participates in the DROP, but must be
deposited in
~
DROP account established for the
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.
{£}
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
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.
ill}
172
173
174
175
176
177 .
178
179
180
181
182
183
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;
(ii)
the employee's average final earnings, excluding
earnings during the period of participation in the
DROP; and
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185
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191
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196
197
198
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200
201
202
203
204
205
206
207
208
209
210
(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
mmlY
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
(in
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
de
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0
0n
is made.
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212
213
214
215
216
217
218
219
220
221
222
223
224
225
226
227
228
229
230
231
232
233
234
235
236
237
(lQ}
Death benefit.
If an employee dies during the employee's
participation in the DROP, the employee's beneficiary will
receIve:
(A)
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
@
the balance of the employee's DROP account.
.Ql)
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-or-living adjustments.
*
*
*
ill
TransterfromRetirement 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
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Expedited Bill No. 20-15
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239
240
241
242
243
244
245
246
247
248
249
250
251
252
253
254
255
256
257
258
259
260
261
262
263
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
I or II, even ifthe employee did not begin or return
to County service on or after October 1, 1994; or
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Expedited Bill No. 20-15
264
265
(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)].
266
267
268
269
*
(7)
*
*
In
[Election to participate] Participation
Retirement Income Plan.
the Guaranteed
270
271
(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 of employment. 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
272
273
274
275
276
277
278
279
280
281
282
283
284
285
286
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
287
288
289
290
@
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292
293
294
295
296
297
298
299
300
301
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:
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 July
L
2015.
~
full­
Participation must begin on the first
~
period after an
time
employee has completed 180 days of full
employment.
(B)
Except as provided
III
302
303
304
subparagraph
(A1
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
~
305
306
307
308
period after an
309
310
311
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
full-time employee must continue to participate in the
same retirement plan.
314
315
(Q
A part time employee who is not a participant in the
Retirement Savings Plan may make a one time irrevocable
election to
p~cipate
316
317
in the Guaranteed Retirement
C!3
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Expedited Bill No. 20-15
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319
320
321
322
323
324
325
326
327
328
329
330
331
332
333
334
335
336
337
338
339
340
341
342
343
344
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)
(ii)
(iii)
(iv)
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
(B)
(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
particip~n
the [retirement savings] Guaranteed
~
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Expedited Bill No. 20-15
345
346
347
348
349
350
351
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
In
the
Retirement Savings Plan [guaranteed retirement
income plan].
*
Distribution of Benefit.
* .*
*
352
33-120.
353
*
*
(f)
354
355
356
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.
357
358
359
360
*
*
*
8)
Optional method
gf
distribution
=
Transfer
to Employees'
361
362
363
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
367
*
*
*
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.
368
369
370 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 ofManagement and Budget
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
Department ofFinance
N/A
N/A
SOURCE OF
INFORMATION:
Linda Herman, Executive
Employee Retirement Plans
Shawn Stokes, Director, OHR
Director,
Montgomery
County
APPLICATION
WITHIN
MUNICIP ALITIES:
NI
A
PENALTIES:
N/A
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~
-) :Ei'J
-
Zfl5
tPR
'6
OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLE, MARYLAND 20850
m
9: 3q
~
-.,)
L1­
:SOP
!);
w
->010
Isiah Leggett
County Executive
MEMORANDUM
April 7, 2015
RiCEiVED
MON TGOMERYCOUNT
Y
COUt~CH.
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, OHR
Joseph Beach, Director, Finance
@
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.
,
.
[.
.
... ·1
Fiscal Impact Statement
Expedited Council Bill XX-IS Retirement - Employees' Retirement System Deferred
Retirement Option Plan - Amendments - Retirement Savings Plan -: 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 impactof$lO,OOO. 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,)95. 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
(In
systems,
including Enterprise Resource Planning (ERP) systems.
I,
@
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. i
As
mentioned
in
#2, there
is
a total one-time impact of $20,000 to make payroll changes,
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.
~d
No additional staff time will be required to implement the bill.
8.
An
explanation of how the addition of new
staff
responsibilities would affect other duties.
No additional staffresponsibilities 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
FY17,
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
j
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.
:~
j
.i
Economic Impact Statement
Bill ##-15, Retirement - Employees' Retirement System - Deferred Retirement
Option Plan - Retirement Savings Plan -Guaranteed Retirement Income Plan ­
Election - Annuity
Background:
'Ibis 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;
e
provide for a Deferred Retirement Option Plan (DROP) for swom deputy
sheriffs
and unifonned correctional officers; and
provide an annuity option for employees who participate in the Retirement
Savings Plan (RSP) from
~e
ERS.
e
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 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 of the
three
projections
and demographic assumptions, there could be an economic impact. At this time, it is
Uncertain what changes to the esti.matedprojections 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 ease?
See paragraph #3 above.
5.
The following contributed to or concurred with this analysis: David Platt and Rob
Hagedoom, Finance; Linda Hennan, Executive Director, Montgomery County
Employee Retirement Plans.
Page 1 of2
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Economic Impact Statement
Bill ##-15, Retirement - Employees' Retirement System - Deferred Retirement
Option Plan - Retirement Savings Plan -Guaranteed Retirement Income Plan - .
Election - Annuity
ph F. Beach, Director
Department of Finance
Page 2of2
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GRS
March 19,2015
Gabrid Roeder Smith
&
Company
Consultants
& Actuaries
20 North Clark Street
Suite 2400
Chicago,
n.
60602-5111
312.456.9800 phone
.3U.456.9801 fax
www.gabrielroeder..com
Ms.
Linda Herman
Executive Director
Montgomery County Employees' Retirement System
Rockville, Maryland
Re: Projections of the Gnaranteed Retirement Income PIan (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 - 33 113% Elect GRIP
50% Elect GRIP
66 2/3% Elect GRIP
Pereentage of New Pereentage of New
Hires Electing GRIP Hires Electing RSP
33 113%
50%
66213%
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 Hennan
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 infonnation 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, 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 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 nonnal 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 nonnal 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 Smith
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@)
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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.
~'
Lance :
Senior Consultant
LW/AW:mrb
::1:
.
~HJ
FCA, MAAA
~v~
Amy Williams, ASA, MAAA
Consultant
Gabriel Roeder Smith
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Graph A
r---------------------------------------------­
Projected Funded Ratio and County Contribution Amounts Based on
Future Annual Investment Return of7.S0% and Alternate New Hires GRIP Election
Scenarios
125.0%
120.0%
::::::
~
14.00%
cr:::,;,,,,,,tM&I~
'-~H'
i~r-!\i'j--[;
fl
i!1,j't-"r----1
'L-J-L-Jl
j
~';
!j--C,
r]
\=/
1
'J
, . r, ',. .:.
I,'
/"
Ii
II
:;'1;
1 }
'i
1
\'.'
~l:
r ..
'.1
L
,.
j,;,
r
12.00%
10.00%
..
~
105.0%
&!
'1:S
-8
~
100.0%
=
95.0%
90.0%
85.0010 -­
80.0%
75.0%
1\,\
m·.f-alJ-il.J-fli:l-i"liif.7J,.1
I
-H'?
.j .'
1:'
1.".
'
"f
"
;~
}-dl;t1:~d.htI.a~}--dl~!_dI,~.t'\1 ,;;rllt4ll~j
{
;
'H'
'"
:,:
'Jjo,tjtt
' . ' , " ' .
.,
l;j--W[
'l
g.ooolo
6.00010
4.00010
2.00010
0.00%
j
=
C>
-.,:I
b
.a
~
,
~~
~
I\,~(Y
'i::J'~
I\,~
r§l"V
I><
I\,~
r§l'Y
~
I\,~~
r>:>1><
Valuation Year/Fiscal Year Ending
®
3/19/2015
Gabriel Roeder Smith
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Company
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Exhibit A
Montgomery County Employees' Retirement System
Projection Results - Comllarlson of GRIP Results Under Alternative Future Investment Return Scenarios
Results Based on July 1, 2014 Actuarial Valuation and 33 113°", 50% lind 66
2130/.
of New Hires Elect GRIP
Alllume. Annual InvOllme.1 Relum of7,50%
($
In Iho...ndll)
GRIP Acllv'e Member
V••r
li:nded
Po}!ulatJon
~
2014
2015
2016
2017
2018
2019
2020
2021
2.022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Inve.tmenc
Return
17.66%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.5()%
7.50%
7.50%
7.500/.
7.50'''
7.50%
7.50%
7.50%
7.500/,
7.50'1.
7.50'/.
7.50%
7.500/,
1.50'10
% ofNe.. Hire. Elecl GRIP
BRullne
66213%
511%
1,263
1,263
1,263
1,346
1,544
1,445
1,409
1,754
1,581
1,465
1,942
1,703
1,516
2,114
1,815
1,562
1,916
2,269
1,604
2,008
2,413
2,546
1,641
2,094
1,676
2,173
2,671
2,786
1,707
2,247
1,736
2,895
2,316
2,996
1,762
2,379
3,089
1,786
2,437
1,808
2,492
3,176
3,256
. 1,828
2,542
3,331
1,847
2,589
1,863
2,631
3,399
1,878
3,461
2,669
1,892
3,517
2,705
3,569
1,904
2,737
2,167
3,617
1,916
GRIP Acllve Member PAZroli
%
ofNe.. Hlre. Fled GRIP
Bo.olI.e
50%
66
2/3'~
$
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
134,749
199,576
167,162
142,627
119,999
217,371
150,738
193,236
235,735
159,090
206,952
254,814
167,598
221,003
274,408
176,463
235,558
294,654
185,670
250,689
315,707
195,130
266,267
337,404
205,012
282,434
359,855
215,171
299,074
382,977
225,762
316,310
406,857
236,746
334,121
431,495
248,014
352,431
456,848
371,425
259,776
483,073
GRIP County Conlrlbullon
RACe
%
orNe.. Hire. Eleel GRIP
B••ellne
50%
662/3%
6.45%
6..45%
6.45%
6.72"10
6.72%
6.72%
6.61%
6.61%
6.61%
6.37%
6.43%
6.48%
6.25%
6.36%
6.45%
6.40'%
6.12%
6.28%
6.04%
6.24%
6.39%
6.06%
6.28%
6.45%
6.08%
6.33%
6.50%
6.10%
6.36%
6.54%
6.12%
6.39%
6.57%
6.13%
6.42%
6.61%
6.14%
6.45%
6.63%
6.15%
6.47%
6.65%
6.16%
6.48%
6.67%
6.50'10
6.69%
6.17%
6.33%
6.63%
6.80%
6.35%
6.65%
6.82%
6.35%
6.66%
6.83%
6.47%
6.75%
6.90%
6.56%
6.81%
6.95%
GRIP Funded R.no
%
orN... Hlru Eloct GRIP
B...II••
SO'"
66
213'~
108.22% 108.22'A, 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% 113.40'1. 112.78%
112.78% 111.96% 111.24%
111.60% 110.67% 109.88%
110.53% 109.50% 108.66%
109.50'A
108.42% 107.56%
108.55% 107.43% 106.56%
107.66% 106.52.% 105.67%
106.78% 105.66%·104.85%
105.94% 104.85% 104.10%
105.13% 104.10% 103.41%
104.33% 103.39% 102.78%
103.67% 102.81% 102.27%
103.02% 102.26% 101.80%
102.39',4 101.74% 101.36%
101.84% 101.30'10 101.00%
101.35% 100.92% 100.69%
RSPpoZroll
%
of Ne.. Hlrel Elecl GRIP
662/3%
DAteline
50',4
203,987
$
203,987
$
203,987
$
213,735
208,427
219,042
224,341
214,618
234,064
249,757
235,650
221,542
265,716
247,176
228,636
258,712
235,685
281,739
270,417
298,057
242,778
314,557
282,143
249,729
293,808
256,436
331,180
348,074
305,576
263,077
311,252
269,391
365,114
382,352
328,947
275,542
340,854
281,759
399,950
352,734
287,715
417,752
364,747
293,610
435,884
454,361
299,517
376,93.9
305,501
473,307
389,404
493,086
402,538
311,990
513,441
416,067
318,692
430,084
534,500
325,667
444,487
332,839
556,136
County Conlribulion Dollan (RSP n"d
GR!!)
%
orN... Hire. Elect GRIP
66213%
BAseline
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
26,512
26,393
26,280
27,965
27,830
28,108
29,427
29,750
29,584
31,542
31,354
31,175
33,360
33,147
32,944
34,958
34,728
35,196
37,065
36,544
36,801
38,962
38,669
38,382
40,884
40,560
40,242
42,852
42,498
42,148
44,858
44,471
44,087
46,907
46,486
46,066
49,333
48,881
48,425
51,526
51,036
50,542
53,791
53.262
52,728
56,391
55,824
55,249
57,802
59,029
58,421
®
3/19/2015
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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
SelVice
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%
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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%
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%
311912015
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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 Mortality
Future
Life
Mortality Rate
Expectancy (years
1
Women
Men
Women
Men
Disabled Mortality
Future
Life
Mortality Rate
Expectancy (years
1
Women
Women
Men
Men
Age
25
30
35
40
45
50
55
60
65
70
75
80
0.0278%
0.0382%
0.0665%
0.0848%
0.1018%
0.1240%
0.2038%
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%
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
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%
0.0425%
0.0607%
0.0957%
0.1412%
0.2507"/0
0.4808%
0.9231%
1.5923%
2.5937%
42767%
72923%
51.06
46.19
41.38
36.59
31.85
27.17
22.66
18.44
14.60
11.12
8.13
5.75
53.61
48.69
43.81
38.96
34.16
29.44
24.89
20.61
16.69
13.15
10.00
7.31
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
(effective
711/2009)
A. Eligibility for GRJP 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 GRJP after at least 150 days of
employment
B.
The GRJP 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, 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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ExhibitC
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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Company
Consultants
&
Actuaries
20 North Clark Street
Suite 2400
Chicago,
n.
60602-5111
312.456~9800
phone
312.456.9801
fax
www.gabrielroeder.com
Ms. Linda Herman
Executive Director
Montgomery County Employees' Retirement System
Rockville, Maryland
Subject:
Dear Linda:
As requested. we have measured the cost impact to the Montgomery County Employees'
Retirement System (ERS) of the 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 of this 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 ofthe DROP account
Cost Impact of DROP Proposal for Group E (Uniformed MCGEO Only)
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Ms. Linda Hennan
Montgomery County Employees' Retirement System
Page 2
The illustrated cost impacts are shown in Exhibits
1-
N:
• Exhibit I - Summary of DROP Scenarios
• Exhibit II - Implement DROP, Scenario 1 Retirement Rates
• Exhibit III - Implement DROP, Scenario 2 Retirement Rates
• Exhibit N - 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
L
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 GroupG.
• 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 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 ofResults
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% ofmembers 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
Accounting
2
Funding
I
230,505
$
2,805,524
85,825
1,631,042
Groug and Scenario
Uniformed M<XEO - Scenario 1 Rates
Uniformed M<XEO - Scenario 2 Rates
I
$
Increase in first year County contnbution (total cost amortized over 20 years).
Increase in G\SB 68 pension expense (total cost inmediately recognized).
2
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Ms.
Linda Herman
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
Firs
t
Fligi1i.lity
$
90,581,379
8,154,735
35.80010
Uniformed
MCGIlD
Active Actuarial Accrued
liability
County Contribution Requirement
$
County Contribution Requirement %
(Includes Retirem:nt Incentive)
Average Age
at
RetirementIDROP
Average Age at Retirement'"
Number ofRetirementIDROP
FIrSt
Year
TotalERS.
Funded
Ratio
(Actuarial Value ofAssets)
Baseline
DROP Scenario 1 DROP Scenario 2
83,638,135
$
86,443,659
$
85,269,177
$
7,693,023
7,923,528
7,778,848
31.88%
33.45%
3274%
55.5
55.5
11
84.20%
54.4
56.5
16
84.14%
55.0
57.1
15
84.17%
533
55.4
28
84.05%
"'Assumes
70%
of members retire
3
years after entering
DROP.
The following provision ofthe 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 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.
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 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,
~:::g~.,
Senior Consultant
cc:
F.C.A., M.A.A.A.
Amy Williams, A.SA., M.A.AA.
Consultant
Mr.
Ryan Gundersen, Gabriel, Roeder,
Smith,
and Company
Mr.
Neil Nguyen, Gabriel, Roeder,
Smith
and Company
L:\c3323_MontgomeryCounty\201S\ImpactStatements\o2Feb20_DROP\MCGEO_ProposaL030920 lS.docx
Gabrid
Roeder
Smith
&:
Company
@
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Exhibit I
Cost Impact of DROP - Summary of Scenarios
Uniformed MCGEO Only
Actuarial Accrued Liability
Net Nonnal Cost
Amortization ofUnfunded Liability
County Contribution Requirement
Average Age at RetirementIDROP
Average Age at Retirement'"
Number ofRetirementlDROP First Year
(Includes Retirement Incentive)
Groue E
Actuarial Accrued Liability
County Contribution 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
l.0
57.1
5
15
100%
DROP/Retirement
Impact"
_
at]'irs t Flig!bil!!!
1,631,042
$
90,581,379
$:
(50,340)
6,520,942
109,677
3,122,190
85,825
8,154,735
-0.5
53.3
1.6
55.4
4
28
Impact"
6,943,244
(101,277)
466,890
461,712
-2.2
-OJ
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
34.30010
6,943,244
461,712
2.32%
TotBlERS
Actuarial Accrued Liability
$
Funded Ratio (Actuarial Value of Assets)
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 DROP .
•• The change in the actuarial accrued liability and the net normal
cost
is
the change in the GASB 68 pension expense accounting cost. The change in the County contribution requirement
ill
the change
in
the first
.
year funding cost (total costs are amortized over 20 years).
~
Gabriel Roeder Smith
Be
Company
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Exhibit II
Cost Impact of DROP - Scenario 1 Retirement Rates
Valualion .. of July 1,1014
Unifurmed
MCGE'O
Uniformed
MCGE'O
hnll!!tI-
DROP
Stenarlo 1
UnifomlOd
MCGE'O
Q'DRlle
Total
Grou~
E
Tot.! FRS
%ofPa~roll
Total GrouE
B
Total FRS
% ofPayroll
Total Group
B
Total FRS
%
ofPayroll
Total An Plans
Actuarial Actrued Liability
Active Memb.•rs
DRSP/DROP Members
Tenninated Vested Members
Retired Members and Beneficiari••
Tota!
Contribution Basis Payroll:
For Nom..1Cost
Por Armrtimtion oCUnfunded Liability
Actuarial Value ofAssets
Unlimded Actuarial Accrued Lisbility
Funded Ratio (Actuarial Value of Assets)
Annual Gross Nanna! Coat
Benoilla
&pen... of Administration
Total
Amortimtion of Unfunded Uabllity
Annual Contribution Requirement:
County Portion
Errployeo Portion
Total
County Public Safety Contribution
Amortization of Unfunded Uability
Annual Contribution Require"",nt:
County Portion
Errploy •• l'ortion
Total
County Public Safety Contribution
$
$
83,638,135
$
162,.527,468
3,084,308
83,638,135
165,611,n6
S 1,373,483,134
99,437,744
26,461,195
~459,547,645
S
86,443,659
$
165,332,991
$
1,376,l88,658
$
2,805,524
$
2,805,524
S
2,805,524
3,084,308
86,443,659
168,417,300
99,437,744
26,461,195
~4S9,547,645
3,958,929,718
3,961,735,242
2,805,524
2,805,524
2,805,524
$
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"10
$
23,007,948
25,012,994
$
37,144,957
42,484,921
$
360,358,868
377,563,844
3,333,484,724
62B,250,518
84.1%
$
(466,205)
(466,205)
$
(466,205)
(466,205)
$
(466,205)
(466,205)
2,805,524
-0.1%
$
6,417,555
204,664
6,622,219
2,599,208
$
10,324,699
327,921
10,652,620
4,381,570
$
74,984,370
2,966,800
77,951,170
56,951,509
(20.78%)
(O.82%}
~21.6CIY.)
$
6,427,933
204,664
6,632,597
$
10,335,077
327,921
10,662,998
$
74,994,748
~,8OO
77,961,548
(20.81%)
(0.82%}
(21.63%)
(15.13%)
$
10,378
10,378
188,654
$
10,378
10,378
$
10,378
10,378
188,654
(0.03%)
(0.1"10)
(0.03%)
$
$
$
(15.07%)
$
EJu:tlldlnB Rellremenlmtenlive
2,787,862
$
4,570,224
$
57,140.163
$
S
188,654
$
(0.06%)
$
7,636,930
1,584,497
9,221,427
$
12,492,562
!,541,628
15,034,190
$
112,667,487
2!,235,192
134,902,679
76,256,907
59,lll,574
(30.51%)
(6.16'Ao
l
(36.67'/0)
$
7,867,435
1.;!53,024
9,420,459
$
12,723,067· S
!,51Q,155
15,233,222
112,897,992
~03,719
135,101,711
(3O.<5O'Io)
{6.16%J
(36.76%)
$
230.505
Ql,473J
199,032
$
230,505
(31.473
l
199,032
$
230,505
{3
1,473
1
199,032
230,505
188,654
(0.09%)
(O.Wlol
(0.09''')
$
2,655,300
$
4,476,127
$
(15.64%)
$
76,487,412
melndln!! Retirement Iucentlve
2,843,954
$
4,664,781
$
59,300,228
S
(15.71%)
$
188,654
$
IBB,654
$
(0.07''')
$
7,693,023
1,584,497
9,2n,520
$
12,587,119
:1,541,628
15,118,747
$
114,827,552
2~5,192
137,062,744
$
(31.08%)
{6.16"!.l
(37.24%)
$
7,923,528
1,553,024
9,476,552
$
12,817,624
~510,155
$
15,327,779
$
115,058,057
22,203,719
137,261,776
76,581,969
(3LJS"Io)
(6.l6%J
(37.34%)
$
230,505
{31,473}
199,032
$
230,505
$
(31.473l·
199,032
$
230,505
121,473)
199,032
230,505
(0.10'10)
(O.OO%}
(0.10''')
76,351,464
Numbers may not add due to rounding.
®
Gabrid Roeder Smith
&
Company
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Exhibit III
Cost Impact of DROP - Scenario 2 Retirement Rates
Valuation as or
J.I~
1,2014
Unifonned
MCUEO
UnifomlOd
MCXiEO
Jrn!!!!:!.
DROP S ..n.... l. 2
CIt.ule
Uni[ol1llOd
MCXiEO
Total
Groue
E
TolalERS
%
of
PSI
mil
Total
Orou~
E
TotalERS
)1,pfPayrpll
Tot.1
GrouP
E
TotalERS
% ofPayrod
Total All Plans
Actuari.1 Accrued LiabWty
Active MembefJ
DRSP/DROP
Me~
....
Terminated Vested Meni,)el'l
$
83.638,1)5
S 162,527.468
3,084.308
Retired Memben
and Beneficiaries
Total
Contribution Basis Paymd:
ForNomlllCost
For Amortization of Unfunded Liability
83,638,135
165,611,776
S 1,373.483,134
99,437,744
26,491,195
2,459,547,645
3,958,929,718
$
8'.269,177
164.158,510
3,084.308
S 1,37',114,176
99,437.744
26,461,195
~459,547,645
$
1,631.042
1,631.042
1,631.042
85,269,177
167,242,818
3,_,560,760
1,631,042
1,631,042
1,631,042
$
23,474,153
2S
t
479
t
l99
31,611,162
42,951,126
S
360,825,073
378,030,049
3,3)),484,724
625,444,994
84,2%
S
23,081,141
25,086,787
S
37,218,750
42,558,714
360,432,661
377,637,637
3,333,484,724
627,076,036
84.2%
S
(392,412)
(392,412)
(392,412)
(392,412)
$
(392,412)
(392,412)
Actuarial Value of
Asuts
Unfunded Actuarial Accrued Liability
Funded !\atio (Actuarial V.lue ofA...ts)
Annuol Oro.. Nollllli Cost
Benefits
E>q>ensos ofAdminiatrotion
Total
Amortimtion ofU.funded Liabilky
1,631,042
0.0Ii
6,417,555
~664
S
6,6<2.219
2,599,208
10,324,699
327,921
10,652,620
4,381,570
$
74,984,370
2,~8oo
77,9'1,110
$
(20.78",(,)
!l!.82%1
(21.60";;)
(15.D7"/O)
$
6,367,215
204,664
6,571,8T9
S
10,274,359
327,921
10,602,280
74,934,030
2~8oo
77,900,830
(20.79%)
1E,82%1
(21.61%)
(15.11%)
$
(50,340)
(so.340)
109,671
$
(50,340)
(50,340)
S
(50,340)
(50,340)
109,677
(0.01%)
[0,00';;1
(0.01%)
(0.04%)
56,951,509
$
I!idudJng Rellrement In.enll""
2,708,885
$
4,491,247
$
57,061,186
S
109,677
Annual Contribudon Requirement:
County Portion
Employe. Portion
Total
County Public Safety Contribution
A,nortHation of Unfun dod Liability
Annual Conuibutlon Requirement:
County Portion
Employ.e Portion
Total
County Public Safety Contribution
S
7,636,930
1,584,497
9,221,421
12,492,562
2,541,628
1',034,190
$
112,667,487
22,235,192
134,902,619
16,256,907
59,111,574
(30.51%)
(6,16%)
(36.67%)
7,722,15S
$
12,518,387
:!.$IS,140
$
112,753,312
~~704
1,558,009
9,2so.164
15,093,'21
S
134,962,016
76,342,732
59,221,251
(30.56%)
(6.16%}
(36.72%)
85,825
[26,4881
59,337
S
85,825
~,4881
$
85,825
[!~4881
59,337
$
59,337
85,825
109,677
(0.05%)
[0,00%1
(0,05%)
mcludlns
Retirement
lncenUw
2,655,300
4,476,127
$
(15,64%)
2,764,978
$
4,585,804
S
(15.68";;)
$
109,671
109,671
$
(0,04%)
1,693,023
1,584,491
9.:1.17,520
12,581,119
2,541,628
15,128,141
114,821,'52
22~5,19l
137,062,744
76,3SI,464
(31,08%)
(6,16%1
(37.24%)
7,778,848
1,558,009
9,336,857
12,672,944
2,515,140
1',188,084
$
114,913,317
22,208,704
137,122,081
76,437,289
(31.13%)
(6.16%1
(37.29%)
$
85,825
Q6,4881
59,337
85,825
(26,488)
59,337
S
85,825
[26,4881
59,337
85,825
(0.0511.)
(,Q,00%1
(0,05%)
$
$
Numbers may not add due to rounding,
@
Gabriel Roeder Smith
&
Company
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Exhibit IV
Contribution Rate Summary - Group E
GroupE
Valuation as of
July 1, 2014
Impact-DROP
Scenario 1
Impact-DROP
Scenario 2
County Contribution Requirement
($)
(Includes Retirement Incentive)
Unifonned MCGOO
Total Group E
Change
in
Total Group E Contribution from the Valuation
Unifonned MCGOO
Total Group E
Change
in
Total Group ERate from the Valuation
$
7,693,0')3
$
12,587,119
7,923,528
12,817,624
230,505
22.08%
21.95%
0.38%
$
7,778,848
12,672,944
85,825
21.72%
21.73%
0.16%
County Nonnal Cost Contribution Requirement
(%
ofPayroll)
21.46%
21.57"10
0.00%
County Contribution Requirement
(%
ofPayroll)
(Excludes Re tire inent Incentive)
Unifonned
MarED
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%
0.52%
County Contribution Requirement
(%
ofPayroll)
(Includes Retirement Incentive)
Unifonned
MarED
Total Group E
Change
in
Total Group ERate from the Valuation
31.88%
31.98%
0.00%
33.45%
32.93%
0.95%
3274%
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
NonnalRet Rate
3.50%
15.00%
15.00%
15.00%
15.00%
20.00%
20.00%
20.00%
20.00%
20.00%
50.00%
50.00%
50.00%
50.00%
50.00%
100.00%
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
Groue E
lst Elig. For Ultimate
NonnalRet Rate
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%
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%
15.00%
15.00%
15.00%
15.00%
25.00%
30.00%
30.00%
35.00%
40.00%
75.00%
80.00%
85.00%
90.00%
95.00%
100.00%
3.50%
8.00%
8.00%
8.00%
8.00%
15.00%
15.00%
23.00%
23.00%
23.00%
55.00%
55.00%
55.00%