Baltimore Considers Employee Pension Contributions

May 22, 2013
Mayor_Stephanie_Rawlings-Blake_Courtesy of the Office of Mayor Stephanie Rawlings-Blake

Courtesy of the Office of Mayor Stephanie Rawlings-Blake

As reported in the Baltimore Sun, the Baltimore City Council’s finance committee is scheduled to hear testimony Thursday on a proposal by Mayor Stephanie Rawlings-Blake to require thousands of civilian employees to begin making contributions. As described,

The proposal would require non-public-safety workers to contribute 1 percent of their salaries to the pension fund next fiscal year. The contributions would increase each year for five years until workers were contributing 5 percent. . . To help compensate for the changes, Rawlings-Blake is proposing a raise for employees of 2 percent a year for five years.

The Baltimore City Employee Retirement System is facing a $700million in unfunded liabilities, according to the Sun.  As reported,

Officials said the pension change and pay increase would cost the city about $180,000 next fiscal year but begin saving money after that: $2.1 million in 2015, $4.4 million in 2016, $6.5 million in 2017, and $8.5 million in 2018.

The savings would help the city fund property tax cuts of 22 percent over the next decade, said Ryan O’Doherty, the mayor’s spokesman.

For more information, see the full story from the Sun.  

Comments Off | Employee Benefits and Relations | Permalink
Posted by Robin Clark

Sharing Risk: Adjustable Pension Plans

May 16, 2013

An editorial in Governing discusses a new compromise between defined-benefit and defined-contribution pension plans that could help avert local pension fund shortfalls.  In simplest terms, conventional “defined-benefit” plans place risk on employers who must pay set benefits despite investment returns, while defined-contribution plans effectively shift that uncertainty onto the employees.  As described by the author, the adjustable pension plan divides the risk,

Adjustable pension plans (APPs) guarantee lifetime payments to employees. But unlike traditional defined-benefit systems, the size of the benefit would be adjusted based on the pension fund’s investment performance during the previous year. For employees, it means that while payments would often be less than under traditional defined-benefit plans, they would be secure.

According to the article, Maine is the first state to consider the approach, though other private-sector employers have adopted adjustable pension plans.

For more information, including a description of adjustable pension plans, see the complete article in Governing.

Comments Off | Employee Benefits and Relations | Permalink
Posted by Robin Clark

Baltimore Mayor Seeks to Close Pension Deficit

April 30, 2013

As reported by WBAL, Mayor Stephanie Rawlings-Blake on Monday introduced two bills dealing with city workers’ pensions and cost-of-living increases for firefighters and police.  The Mayor said the bills would help close the $700 million deficit in the city’s ability to fully fund retirement plans, as reported.

The mayor introduced a bill that would make non-public safety workers pay 1 percent of their salaries into the pension system per year for the next five years so that by 2017, workers would contribute 5 percent of their salary into their pension fund.

It’s a proposal she first came up with in her State of the City address.  “Baltimore’s pension system for civilian workers is the only large system in Maryland that doesn’t require any employee contribution. That must change,” she said at the time.

For more information, read the fully story from WBAL.

Comments Off | County Budgets, County News, Employee Benefits and Relations | Permalink
Posted by Robin Clark

NACo Urges County Pension Flexibility

April 25, 2013

In a letter to the House Ways and Means Committee Working Group on Retirement and Pensions this week, NACo urged the group to ensure any federal tax changes support retirement policies and flexibility at the state and local level.

NACo’s letter describes how the current tax treatment of state and local pensions has supported a robust, cost efficient, and sustainable retirement benefit system, even through recent economic downturns, and asks that the pensions be left untouched by tax reforms.

As you consider possible reforms of the federal tax code, we urge you to “do no harm” to this current system of support for employer-provided retirement plans. Care must be taken so that the tax treatment of retirement savings continues to support real retirement security for American workers, both public-sector as well as private-sector, and maintain the quality of life for future generations of retirees.

According to NACo, the Working Group on Retirement and Pensions is one of several formed to review current tax law in specified areas and seek input from subject matter experts and the general public.  The Joint Committee on Taxation has been instructed to summarize the comments and deliberations of each working group in a report due to the full Ways and Means Committee by May 6, 2013.

For more information, read the letter or contact Deseree L. Gardner​ of NACo at 202.942.4204.

Comments Off | Employee Benefits and Relations, NACo and Federal Issues | Permalink
Posted by Robin Clark

Advisor Disappointed in Potential Pension Funding Cut

April 17, 2013

As covered in the Maryland Reporter, the outside advisor for the Maryland pension system told its Board of Trustees at their meeting this week that he was “very disappointed” that the legislature reduced the state’s payment into the retirement fund by $100 million in budget action this month.

State had aimed to put $300M towards paying the unfunded liability of the pension system.  However, because of the unknown effects of the federal sequestration, the General Assembly decided to hold $100M of that $300M in its rainy day fund until January 1, 2014.  If the funds are not needed, then the state will put that money towards the unfunded liability.  For now, they are putting $200M towards the unfunded liability.

As reported by the Maryland Reporter both the outside advisor and the State Treasurer voiced concerns over the budget action,

If the legislature continued “tinkering” with the $300 million added contribution, said Brian Murphy of Gabriel Roeder Smith & Co., it would show the absence of “a firm funding policy” and require recalculating the annual contribution. GRS is the system’s actuary.

“That’s very sad for the system,” Murphy told the 14-member board holding its monthly meeting in Baltimore. “I can’t tell you how disappointed I was.”

State Treasurer Nancy Kopp, chairman of the board of the State Retirement and Pension System, agreed. “I opposed it strongly,” she said.

For more information, see the full story from the Maryland Reporter or Conduit Street’s previous post, State Budget Provides $100m Hedge Via Pension Funding.

Comments Off | Employee Benefits and Relations | Permalink
Posted by Robin Clark

State Budget Provides $100m Hedge Via Pension Funding

April 10, 2013

As reported in the Baltimore Post-Examiner, the $37 billion budget passed by the General Assembly this session included a provision to hold back $100 million from the pension fund.  The funds from additional salary contributions from state employees and teachers passed were intended to pay down the pension’s unfunded liabilities, but will now be held in case they are needed for revenue shortfalls due to sequestration.  As described by the Post-Examiner,

The cut reduced the use of additional salary contributions from state employees and teachers passed in 2011 [from$300 million] to $200 million, and the $100 million will be set aside in a “dedicated purpose account” to be used if revenues fall.

Some Delegates objected to the provision, which originated in an amendment from the Senate Budget and Tax Committee, and as reported previously on Conduit Street, was the main difference between the Senate and House versions.  As quoted by the Baltimore Post-Examiner, Delegate Susan Krebs of Carroll County stated,

“The pension underfunding is still a huge burden over our head.”

Comments Off | County Budgets, Employee Benefits and Relations, Teacher Pension Shift | Permalink
Posted by Robin Clark

Teacher Pension Costs Affect Budget Priorities

March 29, 2013

As reported in the Cumberland Times-News, last year’s shift of teacher pension costs from the state to counties is leaving a budget hole for Allegany and Garrett counties.  These Counties are finding that supplemental disparity grant, one of several components of last year’s legislation intended to mitigate the shift’s fiscal effect on counties, is not filling the hole.

Jason Bennett, Allegany County’s Finance Director, described that the supplemental disparity grant would not cover the new costs, leaving the county with additional expenses.

“The supplemental disparity grant does not cover the full cost of teachers pensions this year. The amount identified for teacher pensions … is $1,885,754… leaving the county to come up with more than $250,000,” Bennett said.

In Garrett County, there is also a difference between the disparity grant supplemental and the teach pension costs.  Last year, the County paid the difference between the supplemental grant, which was $406,400 and the teacher pension cost, which was $664,714.  This year, the teacher pension costs for Garrett County will increase, while the supplemental grant amount stays the same, according to the Times-News.

The county is still contemplating what level of funding can be paid to the County Board of Education, according to County Administrator Monty Pagenhardt, as cited in the Times-News.

“For fiscal year 2014 this same formula from the state shows $842,544 in teacher pension obligation with supplemental grant again at $406,400. The additional cost difference from 2013 to 2014 is $178,830. It is yet to be determined how much of the difference the county will fund,” Pagenhardt said.

For more information on this topic, read the full article from the Cumberland Times-News.

Comments Off | County Budgets, Education | Permalink
Posted by Robin Clark

MACo’s Pension Bill Clears Senate Hurdles

March 21, 2013

This morning the Senate Budget and Taxation Pension Subcommittee voted a favorable report on SB 741 State Retirement and Pension System – Board of Trustees.  This bill would add one county representative to the Maryland State Pension System Board of Trustees, the oversight body for the pension system.  This MACo initiative reflects counties’ new financial responsibility for the pension system.

As previously reported, the House crossfile, HB 390, which is identical to this bill, passed out of its committee and then the full House 138-0.   The Senate and House bills were sponsored by the Chairs of the Special Joint Committee on Pensions, Senator Jones-Rodwell of Baltimore City and Delegate Melony Griffith of Prince George’s County.

Update: This afternoon, the Senate Budget & Taxation Committee issued a favorable report on SB741/HB390.  The bill will now proceed to the Senate with Senator Colburn added as a co-sponsor.

Comments Off | Employee Benefits and Relations, Intergovernmental Relations, Teacher Pension Shift | Permalink
Posted by Robin Clark

Senate Pension Funding Plan – Long Term Fix, Short Term Cut

March 15, 2013

As the Senate Budget and Taxation Committee is working through its fiscal package for FY 2014, one area of focus has been state funding of pension contributions. From coverage on MarylandReporter.com, a short term cost-cutting move has arisen from the long term plan to eliminate “corridor funding” and regain a more fully funded status.

From the online coverage:

The Senate Budget and Taxation Committee voted Thursday to cut $100 million in contributions to the State Retirement and Pension System for fiscal 2014. The committee tied the unexpected move to passage of legislation that will eventually ensure the state puts aside enough money for employee and teachers pensions. But the cut also adds a year to achieving long-term funding goals for those pensions.

Read the full coverage online.

Comments Off | Employee Benefits and Relations, State Budget | Permalink
Posted by Michael Sanderson

House Moving MACo’s Pension Bill

March 6, 2013

HB 390, MACo’s initiative legislation to add a new member with county experience to the state’s pension board, has been voted out of the House Appropriations Committee, and is currently on the house floor awaiting its final vote of support. The Appropriations Committee voted unanimously to support the bill. Committee amendments add additional co-sponsors to the bill, but left the bill’s substantive provisions intact.

Monitor the bill’s progress through the House online.

See the unanimous vote of support for HB 390 in the Appropriations Committee.

The Senate Budget and Taxation Committee has yet to act on the crossfiled bill, SB 741.

Comments Off | Education, Employee Benefits and Relations, Teacher Pension Shift | Permalink
Posted by Michael Sanderson

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