Fairfax County, Virginia, Tweaks Pensions for Public Sector Employees

Fairfax County Board of Supervisors Appears Headed Toward Minimal Changes on Public Pensions

March 15, 2012

Washington Post - Fairfax County’s Board of Supervisors has signaled its intent to put minor restraints on pension benefits for county employees that would eventually save taxpayers as much as $11.5 million a year, but its members also affirmed their commitment toward maintaining traditional pensions for its workforce.

At a meeting of the Personnel and Reorganization Committee, the Board arrived at an informal consensus to maintain the defined-benefit pension plan that its workforce of approximately 12,000 employees has now. The decision, although not unexpected, was hailed as a victory by county employees.

But the supervisors also agreed during Tuesday’s committee meeting to consider several measures that would curb some benefits and tighten retirement eligibility. These would raise the minimum retirement age from 50 to 55, increase the rule of 80 to a rule of 85, cap the amount of accrued sick leave in determining retirement eligibility, and eliminate the Social Security supplement that early retirees receive before the age at which they qualify for full Social Security benefits.

The rule of 80 is a common formula for determining retirement eligibility that combines an employee’s age and years of service. For example, under current regulations, a non-public-safety worker who is 55 years old and has been working for the county 25 years could be eligible for retirement.

If all the proposed measures were adopted, including the cap on sick leave, the county payroll would begin realizing savings of $602,000 on the amount contributed to employees’ retirement benefits in fiscal 2015. Those savings would then rise to more than $11.5 million a year by fiscal 2027, according to an analysis prepared by Human Resources Director Susan Woodruff’s staff and an actuarial firm.

Still, the board did not take formal action, and several members said they needed to know more before taking a position on whether to cap sick leave allowances at 2,080 hours when determining retirement eligibility and benefits. Under the current system, for example, an employee who accrued 2,080 hours of hours of unused sick leave — which is the equivalent of a year’s work — could take retirement a year earlier.

Employee representatives warned that if the county capped the use of sick leave for retirement, employees might be more inclined to use their allotted sick leave rather than bank it, perhaps by staying home with a sniffle when they might otherwise report to work. That could have the unintended consequence of driving up overtime costs paying for substitutes who cover their shifts.

The average unused sick leave balance is about 480 hours for employees eligible to retire, and only 4.27 percent of those have balances of more than 2,080 hours, Woodruff said. Board Chairman Sharon S. Bulova (D), who said she believes the county’s current pension system is fair to taxpayers and workers alike, nevertheless said the board probably would build some of the proposed changes into the fiscal 2013 budget, whose outline is being debated.

Like government retirement systems across the country, Fairfax County’s pension system had become a focus of debate since the economy soured more than four years ago. Critics have argued, particularly during last year’s elections, that taxpayers can no longer support retirement benefits that much of the private sector jettisoned long ago. Supervisor John C. Cook (R-Braddock) and other Republicans suggested the county take a look at switching to defined-contribution plans such as the 401(k) to save money.

But a consulting firm’s retirement study found that Fairfax County’s retirement benefits are generally in line with other jurisdictions in the region, including the federal government.

Several employee representatives made the case that, given the experience and expertise among the workforce, the county’s compensation and pension benefits are fair. Karen Conchar, president of the Fairfax County Government Employees Union SEIU Local 5, pointed out that the average age of a new employee is 35 years old.

“So we’re not bringing in the young kids out of college,” Conchar said. “We do require significant schooling, certifications [and] licensing in just about every job description we offer besides labor.”

Employees are most concerned about the possibility of losing as much as $1,341 per month if the Social Security supplement were eliminated for early retirees, Conchar said. The county’s average age of retirement is 61. The age to receive full retirement benefits under Social Security was 65 for many years but has increased to 67 for those born after 1959.

“Retirement is the draw for Fairfax County as far as hiring and retiring employees,” said Randy Creller, who chairs the Fairfax County Employees Advisory Committee, which represents all employees, including public safety personnel.

If the county levels the playing field, Creller warned, talented employees might opt to work in neighboring jurisdictions where commuting and other costs are lower.

Afterward, Cook said he remains uneasy about the sustainability of a pension system that has required repeated infusions of taxpayer money in recent years to offset $1.7 billion in unfunded liabilities.

County Executive Anthony H. Griffin has proposed contributing nearly $7.5 million in fiscal 2013 to shore up the pension systems’ portfolios, following similar contributions of as much as $35 million over the two previous budget cycles. Its percentage of the employee-employer contribution has grown, partially to make up for shattering market losses to the systems’ pension funds during the recession.

But Robert L. Mears, executive director of the Fairfax County Retirement Administration Agency, said the county’s pension funds remain on solid footing. Enormous investment returns since the last recession, along with changes to actuarial calculations of retirees’ life spans and the like, are gradually returning the system’s funds to full health, he said.