Volunteer retirement program gives commissioners sticker shock
Leonardtown, MD
By Dick Myers Bay Net
While walking their way through the proposed budget for the next fiscal year the St. Mary’s County Commissioners stepped on a land mine. They were presented by Chief Financial Officer Elaine Kramer with an “Actuarial Valuation” from a consultant that shows that the county has a $17 million unfunded liability for the retirement system for volunteer members of the county’s fire and rescue service. The program called Length of Service Award Program (LOSAP) was established in 1980.
The $17 million figure was in a report from Bolton Partners of Baltimore, and makes a set of assumptions which they admit might not be the only possible scenario. Based on their evaluation, Mark Kelbaugh of the consulting firm recommends that the county set aside $2.1 million annually even though the actual anticipated payout in FY 2015 is only $901,000. The extra monies would allow the county to build up a reserve for future years.
The county has been boastful of their effort to build up reserves for county and school system employee’s health insurance or OPEB (Other Post-Retirement Benefits) The LOSAP issue is an entirely new issue for them. Creating such reserves is a federal accounting mandate.
Kramer in her presentation recommended that the county only put $400,000 in a LOSAP reserve in Fiscal Year 2015 in addition to the monies budgeted for the anticipated payout next year. She recommended that the county start putting in the larger amount recommended by Kelbaiugh in future years,
The new information caused the commissioners to take pause during a work session on Tuesday and to delay making a decision on whether they would provide a cost of living (COLA) adjustment or STEP increase for employees and if so how much. One STEP increase could cost $550,000. Giving a $1,000 Top of Grade (TOG) adjustment for those not eligible for a STEP would be an additional $100,000.
There are currently 780 active LOSAP participants, 231 retirees and 40 beneficiaries, for a total of 1,951. Average age of participants is 35.9 year and average length of service is 9.5 years.
Under the LOSAP program, normal retirement age falls in to three categories: Option 1, 60 with 20 years of service; Option 2, 55 with 20 years of service; and Option 3, 70 with two years of service in the preceding five years.
The Benefit is: Option 1, $200 per month plus $8 per month for each year over 20; Option 2, $150 per month plus $8 per month for each year over 20; and Option 3, $8 month for year of service.
Those eligible for LOSAP also receive a COLA based on the same amount provided by the Maryland State Pension System. The LOSAP is a life-Annuity for the volunteer with a 50 percent survivor benefit for the spouse of the volunteer.
The commissioners have work sessions on the budget scheduled for Monday and Tuesday, March 10 and 11. They are expected to address the employee compensation issue on March 10 along with reviewing the sheriff’s request. The commissioners are expected to finalize the recommended budget on March 18 that will go to a public hearing on April 15. They have advanced the date for finalizing the budget from June 1 to May 13 this year.