The Maryland State Retirement and Pension System Board of Trustees recently asked the Joint Committee on Pensions to introduce legislation that would amend the current statutory funding policy for the System’s participating governmental units, which include many municipalities and eleven county governments.
The legislation would increase the employer contribution rate for the participating government units in the plan beginning with the FY2018 billings, as compared to the rates projected for the same period under the current law. However, none of these future billings will exceed the amount that was billed to a local participating government in December 2014.
As described by Dean Kenderdine, Executive Director of the State Retirement Agency, the legislation seeks to avoid a large increase in the contribution rates affecting the FY2022 billings,
Presently, the Municipal Pool of the Employees’ Pension Plan has an amortization policy that creates and maintains a separate amortization base each year for gains/losses, benefit changes or changes in assumptions. Each year, one base rolls off and another is added. In the “pipeline” of bases, is one which carries a credit and when that base rolls off in 2020, the PGU contribution rates will spike and dramatically affect billings issued in December 2021 (FY2022).
The State plan had the same funding policy until it was changed in 2013 to a closed 25-year amortization. The same type of closed 25-year amortization is being proposed legislatively for the PGU pool to avoid the spike in FY2022 contributions.
Director Kenderdine has been meeting with the eleven counties that are active in the System and has advised them of this proposed change in law. He is also planning a series of regional meetings to which all participating government units are invited, where he will discuss the law change and its implications for future contribution rates.