State Pension System Proposal May Cost Participating Counties

The Joint Committee on Pensions held their first meeting this fall on October 31.  Representatives of the State Retirement Agency presented the Board of Trustees’s legislative proposals at the meeting.  There were five legislative proposals on the following subjects:

  1. Imposing a 45-day break in service for all retirees who are reemployed by any employer who participates in the state retirement and pension system
  2. Allowing the Board to recover overpayments made to retirees and designated beneficiaries
  3. Repealing legislation that allows a participating governmental unit to deduct its administrative fees from its annual employer contributions
  4. Clarifying the way that sick leaves is calculated for employers who provide more than 15 days sick leave per year
  5. Amending the computer programming used to calculate cost of living adjustments

The Board’s third recommendation would have a fiscal impact on Maryland counties who participate in the pension system and other participating governmental units.  Repealing legislation that allows participating governmental units (PGUs) in the pension system to deduct administrative fees from their annual employer contributions creates an additional cost for PGUs going forward.

The ability to deduct administrative fees was written into The Budget Reconciliation and Financing Act of 2011.  The law has only been in effect for about two years, and participating governmental units have only been charged administrative fees one time.  Prior to 2011, administrative fees were paid through employer contributions.

MACo received a list of administrative fees for county PGUs from the State Retirement Agency.  According to this list, administrative fees for county PGUs totaled $1,026,593 in 2013.  Fees are calculated on a per employee basis so larger employers have larger administrative costs.  The largest fee for county PGUs was Prince George’s County Government, with a fee of $419,045.

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