Pension benefits reviewed

July 16, 1997


Staff Writer

Despite problems with a pension plan that shows a $7.4 million deficit, Personnel Manager Eric Marburger recommended Tuesday that the city council endorse an enhanced benefits plan from the Maryland State Retirement and Pension Agency.

The plan would provide 45 percent of an employee's final salary at the end of 30 years of service. The current pension plan provides just 24 to 28 percent at the end of a career, ranking 47th among state pension plans.

Employees would contribute 3 percent of their pre-tax pay and it would cost local governments an additional to 1.39 percent of payroll. This year's premium from the city for the current plan would be $1.2 million. Based on that figure, the city would pay an additional $130,000 to $180,000 a year for enhanced benefits.


The proposal for the enhanced benefits system includes state employees and teachers, but not local government employees. Marburger said the board of trustees of the MSRPA will decide whether local governments can participate. The board wants to know how many local governments now in the state system endorse the enhanced benefits plan.

Marburger also unveiled a revised amortization plan for retiring the remaining $7.4 million of the unfunded liability. He recommended adopting the 40-year phased-in plan, which would see the city's payment on the deficit go from $209,921 this year to $2,218,101 in the final year, 2036. A straight-line payment plan increasing 5 percent each year would start at $316,627 and end with $2,122,907.

In either case, the city ends up paying upwards of $40 million over 40 years.

The phased-in payment plan starts out smaller and Marburger said that makes sense since the state may offer to pay off more of the pension fund debt next year. This spring, the General Assembly passed a bill giving the city $2.5 million to pay off part of what had been a $10 million pension deficit.

"We still will need to introduce the legislation, do our lobbying" and press for more money from the state, Marburger advised the council.

Susan Saum-Wicklein and other members of council questioned the wisdom of staying with the state pension plan, since it was the retirement agency that made the mistake of under-billing the city over a period of years.

Marburger and city Director of Finance Alfred Martin said it could create a larger debt to opt out of the system.

Part of Hagerstown's pension woes are due to a low employee turnover. Martin noted the city has 430 employees supporting a pension plan for 170 retirees. Washington County, which is not in the state system, has 602 employees supporting about 100 retirees.

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