DeKalb County leaders appear to have reached an agreement to re-tool the county’s grossly underfunded pension plan.
The plan: closing the current traditional plan to new employees, except for sworn police and firefighters. Instead, part of their future retirement income would come a 401K-styled plan, plus a traditional pension plan that it less generous than the current one. If the move is applied all new hires after a certain date – likely Jan. 1 – it would save county taxpayers about $30 million of the projected $560 million they are projected to spend on the perk over the next decade.
If the change excludes new police and firefighters – a fringe benefit designed to stanch the loss of sworn officers in recent years – and would save about $20 million that could be shoveled back into the county’s pension fund.
DeKalb’s pension, which covers all vested workers, is just 65 percent funded. That means the plan currently only has enough assets to cover 65 percent of its long-term obligations to current employees and retirees.
A new plan is projected to inch that up to about 68 percent funded, though exact projections were not available.
“We know staying the same is not an option,” said interim CEO Lee May, who introduced the change Tuesday during a work session with six remaining commissioners. “This way, we address the savings problem and the funding problem and also address retention problem we know we have.”
Doing nothing appeared to be the only option just a few months ago, despite commissioners discussing various changes for nearly three years. Meanwhile, neighboring counties such as Fulton and Gwinnett have moved to entirely defined contribution plans, those like private-sector 401K plans, for workers there.
DeKalb’s originally proposed a so-called hybrid plan – a 3 percent defined contribution and 1 percent traditional pension – that won over four of the seven commissioners. That was enough to pass it but not enough to override a veto from now-suspended CEO Burrell Ellis, who opposed any change to the county’s system.
May, one of the original four commissioners who supported a change, revived the issue shortly after taking over as interim CEO in June.
Carving out the 40 percent of county employees who work in public safety appears to be the key in winning over the commission, all of whom said Tuesday they support the concept.
With a $640 million liability on pension – larger than the county’s $560 million operating budget – the current gap will soon make it tougher for the county to provide services such as police patrols and adding more parks.
“One thing we know for sure, the way we do it now is not sustainable,” said Commissioner Elaine Boyer, who spearheaded a change with Commissioner Jeff Rader. “We need a plan to plug into the budget.”
Now that May and the commission have agreed on a general framework, a consultant plans to bring back a report with more firm numbers to a meeting in early September.
A vote is likely before December, given that May must present his proposed 2014 budget by Dec. 15. Following that, the commission is likely to take up additional changes, such as extending the county’s retirement age, now 62.
Increasing the retirement age by five years, for instance, saves about $500,000 a year for the next few years but could save $1 million or more every year in the next two decades.
“I’m glad they are really trying to attack this issue head-on because the pension has a direct cost to taxpayers,” said Viola Davis, a nurse and longtime taxpayer advocate from south DeKalb. “I want to wait and see what they come up with.”
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