Joint Committee on Pensions Reviews 2015 Legislative Proposals

December 11, 2014

In its most recent meeting, Maryland’s Joint Committee on Pensions reviewed legislation proposed by the Board of Trustees of the Maryland State Retirement and Pension System.

Under current law, members of the State Retirement and Pension System may receive additional creditable service for unused sick leave at the time of their retirement. One of the Board’s proposals this year is to clarify the definition of sick leave to make sure that employers participating in the State Retirement and Pension System are not allowing employees to convert other types of leave into sick leave prior to reporting unused sick leave to the Agency.

Another proposal involves the combining of prior service credit with the Reformed Contributory Pension Benefit.  In that area, the Board recommends clarifying the rate that will be used to determine the amount that a member must pay to combine prior service.

For more information, read the Joint Committee on Pensions 2014 Interim Report (DRAFT).

Report Recommends Making State Pension Membership Optional for Elected and Appointed Officials

December 11, 2014

Some county governments participate in the State of Maryland’s Employees’ Pension System.  A new report from the State Retirement Agency studies the issue of optional membership for elected and appointed official in the Employees’ Pension System.  With some exceptions, membership in the System is mandatory for elected and appointed officials who were elected or appointed after July 1, 2004.

The report considers the history of the System’s rules for elected and appointed officials, including some examples from local governments, including Kent, Dorchester, and Prince George’s Counties. Participating governmental units in the Employees’ Pension System include:

  • Worcester County Detention Officers
  • Allegany County Commission
  • Cecil County Government
  • Dorchester County Commission
  • Garrett County Commission
  • Harford County Government
  • Kent County Commissioners
  • Prince George’s County Government
  • Queen Anne’s County Commissioners
  • St. Mary’s County Government
  • Somerset County Commissioners
  • Talbot County Council
  • Worcester County Commission
  • Dorchester County Commission
  • Harford County Government
  • Kent County Commissioners
  • Queen Anne’s County Commissioners
  • Worcester County Police

The report recommends amending current law to make membership in the Employees’ Pension System optional instead of mandatory for elected and appointed officials.  The report also recommends a twelve month time-frame for elected or appointed officials to choose to join the System.

For more information, read the Overview of Optional Membership for Elected and Appointed Officials in the Employees’ Pension System from the State Retirement Agency.

Maryland’s Governor-elect Hogan Will Not Continue Private Pensions Task Force

December 3, 2014

The incoming governor said he will not extend the life of a task force created to recommend whether to set up a pension system for private-sector employees, according to a report by the Daily Record. Governor O’Malley created the Task Force to Ensure Retirement Security for All Marylanders in an Executive Order this past spring.

The Task Force’s most recent meeting was held on December 1 in Annapolis.  The goal of the Task Force was to “develop recommendations on the most productive steps that the State of Maryland could take to ensure that every private-sector employee in Maryland has the opportunity to enjoy a secure retirement.”

For more information, see the Daily Record (subscription required) and these recent articles, Hogan Critical of Private Sector Pension Task ForceGovernor O’Malley Appoints Members of Retirement Security Task Force, and Governor Establishes Retirement Security Task Force.

FY 2015 Report of Maryland County Employee Salaries, Health Benefits & Pensions Released

November 7, 2014

The Report of Maryland County Employee Salaries, Health Benefits & Pensions for Fiscal Year 2015 is now available on MACo’s website.

Complete Report of County Employee Salaries, Health Benefits & Pension for Fiscal Year 2015 – This link contains the Report’s introduction and table of contents, a list of County Human Resources contacts, and county employee salaries, health benefits, and pension plans for each of Maryland’s counties and Baltimore City.  Baltimore City’s information will be updated in January 2015.

A break-down of sections of the Report are also available:

MACo would like to thank our County Human Resources Officers for their contributions to this year’s Report.

*Note: A previous version of this article linked to incorrect salary information for St. Mary’s County.  The links in this article have now been updated. A special thanks to Tracie McPherson and the St. Mary’s County’s Human Resources Department for helping to maintain the accuracy of this Report.

Foreign Comparison Exposes the Risks Involved in US Pension Management

October 16, 2014

According to a recent article in the New York Times, a foreign comparison brings to light the risk involved in US pension management. Dutch pension plans are well-funded by comparison to US pension plans, and they are required to report their liabilities using a method from the financial-services industry, according to the Times.

Notably, the Dutch central bank prohibited the measurement method that virtually all American states and cities use, which is based on the hope that strong market gains on pension investments will make the benefits cheaper. A significant downside to this method is that it lets pension systems take advantage of market gains today, but pushes the risk of losses into the future, for others to cope with. “We had lengthy discussions about this in the Netherlands,” said Theo Kocken, an economist who teaches at the Free University in Amsterdam and is the founder of Cardano, a risk analysis firm. “But all economists now agree. The expected-return approach is a huge economic offense, hurting younger generations.”

He explained that in the Netherlands, regulators believe that basing the cost of benefits today on possible investment gains tomorrow is the same as robbing tomorrow’s workers to pay for today’s excesses.

In Maryland, the State Retirement and Pension System Board of Trustees recently lowered the expected return of the pension system investments by 0.05% each year for four years, starting in 2013, towards an assumed rate of return of 7.55%.  Also in recent years, the Governmental Accounting Standards Board introduced new standards for pensions reporting.

For more information, see the full story from the New York Times and these previous posts on Conduit Street, The Financial Health of the Maryland State Pension SystemMaryland State Pension System: Investment Strategy and Management, and The State Pensions System’s Comprehensive Annual Financial Reports and New GASB Standard Approaching for Pension Funds.

Largest US Public Pensions Now Face $2T Hole

October 3, 2014

As reported by Bloomberg News, the 25 largest U.S. public pensions face about $2 trillion in unfunded liabilities, according to Moody’s Investors Service.  As described,

“Despite the robust investment returns since 2004, annual growth in unfunded pension liabilities has outstripped these returns,” Moody’s said. “This growth is due to inadequate pension contributions, stemming from a variety of actuarial and funding practices, as well as the sheer growth of pension liabilities as benefit accruals accelerate with the passage of time, salary increases and additional years of service.”

As far as pension liabilities in Maryland, in June of 2013, the System’s unfunded liability was approximately $20.7 billion, for a funding status of 65.5%. Pension cost increases, low market returns, and low levels of funding contributed to this unfunded liability.

Some cost increases of the system can be attributed to the General Assembly’s 2002 Bridge to Excellence (“Thornton”) legislation, which led to jobs and salary increases for educators, creating additional liabilities for the pension system.  In the seven years following Thornton, state general fund expenditures for teacher pensions grew by 93%, but teacher pension costs grew by 159%.  In addition, in 2006, the General Assembly increased benefits and increased a multiplier for the Teachers’ and Employees’ pension systems, increasing liabilities by $1.9 billion.

The Maryland legislature and Governor have begun working to reduce pension costs spurred by initiatives that increased costs over the last ten years.  The General Assembly passed significant system reforms in 2011.  In 2012, the State also reduced some of its own costs for the pension system by shifting a portion of the teacher’s pension costs to county governments. Recent budgets have included provisions to reinvest savings from pension reforms towards paying down the pension’s unfunded liabilities. Prior to these reforms, the State’s “corridor” funding method maintained fixed contribution rates from year-to-year as long as the funded status for each of these systems remained in the “corridor” of 90% to 110%.

In its coverage of the Moody’s report, Bloomberg News also describes how pension commitments are impinging on other government responsibilities, such as local infrastructure, stating,

U.S. states and cities are contending with underfunded worker retirement systems. The 18-month recession that ended in June 2009 wiped out asset values and forced cuts to contributions. Now, liabilities are crowding out spending for services, roads and schools.

For more information on the current pension crisis, see the full story from Bloomberg News and these previous posts on Conduit Street, Conference Session: Maryland’s Progress Towards Pension SecurityPension System Earns 14.37% in Fiscal 2014, and State Policy Changes Boost Teacher Pension Costs. The full Moody’s report, US State and Local Government Pensions Lose Ground Despite Meeting Return Targets, is available for a fee.


Anne Arundel Board of Education Adopts New Suspensions Policy

August 21, 2014

Richard Benfer, President of the Teachers Association of Anne Arundel County. Photo courtesy of the Maryland State Education Association.

As reported by The Capital Gazettethe Anne Arundel County Board of Education on Wednesday approved a new policy for student suspensions and expulsions that focuses on rewarding positive behavior instead of punishing negative behavior.  The Gazette describes,

The policy is designed to keep kids in the classroom, and focuses on fostering, teaching and acknowledging favorable behavior, school officials say.

But it’s hard getting through a lesson plan with a disruptive student in the room, and the shift will mean that such students spend more time in the classroom instead of the principal’s office, said Teachers Association of Anne Arundel County President Richard Benfer.

According to John Woolums, Director of Governmental Relations of the Maryland Association of Boards of Education, there is also the budgetary concern that more in-school suspensions could increase costs.  New professional development needs and additional in-school educational services and behavioral supports, including hiring additional staff such as counselors, social workers and school psychologists could be associated with the change.

For more information, see the Capital Gazette.  For more information on the statewide shift in suspensions policies, see our previous posts on Conduit Street: Queen Anne’s School Board Adopts New Student Discipline PolicyLocal School Boards React to State’s New School Discipline RegsProposed Student Discipline Regs Draw Local ConcernState Education Board Approves Engagement, Testing, Disciplinary PoliciesState Education Board Considers New Discipline Regulations.


Conference Session: Maryland’s Progress Towards Pension Security

August 16, 2014

From left to right: Anne E. Gawthrop, Esq., Director of Legislative Affairs, Maryland State Retirement Agency; Kristin Barcak, Ten-Year Financial Plan Manager, Baltimore City; Elizabeth K. Kellar, President/CEO, Center for State and Local Government Excellence; Senator Edward Kasemeyer, Chair of the Senate Budget & Taxation Committee

Senator Edward Kasemeyer, Chair of the Senate Budget & Taxation Committee led a discussion of public pension plan liabilities and the ways that the State and local governments are working to reduce liabilities.

During the session, In the Wake of Detroit: Public Pension LiabilitiesElizabeth K. Kellar, President/CEO, Center for State and Local Government Excellence gave national perspective on unfunded liabilities of pension plans.

Anne E. Gawthrop, Esq., the Maryland State Retirement Agency’s Director of Legislative Affairs began with a brief history of  the State Pension System’s funding, including the effects of the “corridor” funding method. She described the General Assembly’s reforms of the pension system, including the plan to reinvest savings back into the system and other changes that will help bring the State’s system back into a healthy level of funding by 2025.

Kristin Barcak, Baltimore City’s Ten-Year Financial Plan Manager, began her presentation by noting the financial strain on the City of Baltimore. She then described how the reforms will bring the City’s benefits package into alignment with industry standards and sustain its ability to raise salaries, changes that are in line with the interests of  millennial job seekers.


Federal Court Upholds Baltimore City Pension Reforms

August 7, 2014

Baltimore City Solicitor George A. Nilson. Image courtesy of the Daily Record.

As reported by the Baltimore Sun, a federal appeals court on Wednesday upheld Mayor Stephanie Rawlings-Blake’s overhaul of Baltimore’s police and fire pension system, but left open avenues for the unions to keep fighting. As described,

The 4th U.S. Circuit Court of Appeals in Richmond, Va., overturned a lower court’s ruling in 2012 that a key provision of the 2010 law limiting cost-of-living increases for younger retirees was unconstitutional and not reasonable. The appeals court concluded that the rights of the police officers and firefighters “were not impaired” because they could have contested the law in state court for “breach of contract.”

The city’s victory Wednesday likely was not the final word about the changes, which took effect in 2010. Judge Barbara Milano Keenan of the 4th Circuit wrote that the unions could try again to challenge the law using a different argument, specifically that the city has taken “private property for public use, without just compensation.”

For more information, see the full story from the Baltimore Sun, and our previous posts on Conduit Street, Baltimore City Adopts Series of Pension Reforms, Latest Ruling Props Pieces of Baltimore City Pension Overhaul.


Kristin Barcak, Baltimore City Ten-Year Financial Plan Manager

Kristin Barcak, Baltimore City’s 10-year Financial Plan Manager will be discussing the City’s reforms of the pension system at MACo’s Summer Conference. In the Wake of Detroit: Public Pension Liabilities, sponsored by Human Resources Affiliate and moderated by The Honorable Edward J. Kasemeyer, Chairman of the Maryland State Senate Budget and Taxation Committee, will include a discussion of Baltimore City’s pension reforms and changes to the state’s pension system aimed at reducing liabilities. Elizabeth K. Kellar, President/CEO, Center for State and Local Government Excellence will provide a national perspective on the issue, and insight into the Detroit case.

This session will be held on Thursday, August 14, 2014 from 3:30 pm – 4:30 pm.

Learn more about MACo’s 2014 Summer Conference:

Contact Meetings & Events Director Virginia White with questions about Summer Conference.

Pension System Earns 14.37% in Fiscal 2014

July 30, 2014

As reported by, Maryland’s State Retirement and Pension System earned 14.37% in fiscal 2014, bringing the total value of the system up to $45.4 billion, a gain of more than $5 billion for the year.

It was the second year in a row of strong performance due to sharp upturns in stocks, according to Chief Investment Officer Melissa Moye. The fund exceeded its target of 7.7% and its market benchmark of 14.16% — what its basket of assets would have been expected to earn.
The System’s press release provides additional information.
“The funds annual returns continue to reflect the strong market environment that has prevailed since the end of the credit crisis,” said State Treasurer Nancy K. Kopp, Chair of the Maryland State Retirement and Pension System Board of Trustees.


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