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Washington County delegation reacts to new state pension plan

Serafini describes agreement as 'a good first step'

Edwards says it is moderate progress

April 05, 2011|By ANDREW SCHOTZ | andrews@herald-mail.com

ANNAPOLIS — Washington County Republican Del. Andrew A. Serafini on Tuesday described the newly minted state pension agreement "a good first step."

State lawmakers reached a deal Monday on changes to the pension plan, as well as health-care coverage for retired state employees and their families.

Maryland's unfunded liabilities are estimated at $19 billion for pensions and $16 billion for retiree health coverage.

As of June 2010, the state's pension system was funded at about 64 percent; 80 percent is considered a safe level.

An appointed work group — the Public Employees' and Retirees' Benefit Sustainability Commission — has called the current pension system "unsustainable."

Gov. Martin O'Malley, a Democrat, proposed letting state employees and teachers keep paying 5 percent of their salary toward retirement, with the multiplier determining their pension drop from 1.8 for each year of service to 1.5.

To continue at 1.8, employees would have to contribute 7 percent of their salary, under O'Malley's plan.

The agreement reached Monday drops the multiplier from 1.8 to 1.5 for new employees.

They will pay 7 percent of their salary into the system and will be vested after 10 years, up from the current five.

Also, the pension system will use a "Rule of 90." For employees who retire before age 65, their age plus their years of service must add up to at least 90.

Senate President Thomas V. Mike Miller Jr., D-Calvert/Prince George's, had recommended shifting some pension costs to local governments.

The state pension system currently includes teachers employed by county boards of education.

Serafini said the new plan is a step forward, but doesn't get the state pension system to a sustainable level.

"We're gonna be right back at this," he said.

He said only some of the money taken in through increased contributions will go to the pension fund; a majority will go to the general fund.

Sen. George C. Edwards, R-Garrett/Allegany/Washington, who served on the committee that reached a final budget accord, said the pension agreement is moderate progress.

"When you're dealing with two different groups, you've got to work to compromise," he said Tuesday. "It does help out considerably in the (future) years."

He said the agreement essentially keeps a promise to employees about what pension they'll receive, as long as they pay an additional 2 percent of their salary.

Edwards said vesting after 10 years is still fair, especially for career employees.

Del. John P. Donoghue, D-Washington, said the conference committee did a good job, considering the difficult economic climate.

As the economy improves, the General Assembly will re-evaluate the pension system each year.

"If things need to be changed in any way, we can do that," he said.

On behalf of the House Republican Caucus, Serafini led a work group this session that examined the pension problem.

He submitted bills proposing other ideas for the pension system, such as defined contributions, cash-balance (defined benefits, with a lump sum or annuity) and a hybrid, with both defined benefits and defined contributions.

The House Appropriations Committee did not approve his bills.

The budget conference committee also agreed this week on new limits for retiree prescription-drug coverage.

Currently, out-of-pocket expenses are capped at $700 a year.

O'Malley had proposed increasing that to $4,550 for a retiree and $9,100 for a couple.

The House and Senate each set the caps well below O'Malley's level. The final agreement — a compromise between the two chambers — was $1,500 for a retiree and $2,000 for a couple.

Donoghue said the lower caps were an important improvement.

Edwards said the caps O'Malley proposed were "a big chunk of money" for retirees on fixed incomes. The new levels are more reasonable, yet help lighten the future liability, he said.

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