Before deciding on proposed changes to Fairfax County’s pension plans early next month, the Board of Supervisors will have to weigh the potential impact on employee happiness and recruitment versus the public’s ability to pay.
Supervisors heard from more than 40 people at a three-hour-long Nov. 20 public hearing on the issue. At stake were these proposals:
* For the standard employee pension plan, county officials are proposing raising the minimum retirement age from 55 to 60 and increasing the retirement-eligibility formula of age-plus-years-served from 85 to 90.
* For employees and uniformed workers (such as those in the Fire and Rescue Department and Sheriff’s Office), eliminating the pre-Social Security benefit and implementing in its stead a plan that would allow employees to select a higher annuity initially in exchange for a reduced annuity after reaching Social Security age.
* For employees, uniformed workers and police, increasing the final salary-averaging period for retirement-payment calculations from three years to five and repealing the annual 3-percent increase from the initial annuity.
Supervisors, who on Dec. 4 have the options of selecting all, some or none of the above choices, emphasized the changes would apply only to new county employees hired on or after July 1, 2019.
“The board, all of us, have felt this is a contractual, really, issue,” said Board Chairman Sharon Bulova (D). “If you joined the county under certain expectations and you’ve based your retirement plans on what you believed would be the deal when you came to the county, we are not changing that for current employees.”
(Fairfax County Public Schools participates in three separate pension plans, which are not controlled by the Board of Supervisors.)
Many county employees and their representatives attended the supervisors’ hearing and advocated against the proposed changes.
“Our retirement systems are strong, they are well-run, they are well-funded and trending upward,” said Fairfax County police detective Sean Corcoran, president of Fairfax Coalition of Police Local 5000. “There is no need to be here in a completely contrived crisis.”
Others argued setting different pension rules for new employees would produce negative impacts on recruitment and employee morale.
“What people forget is this kind of talk impacts lives and divides us and creates a second-class employee,” said Ronald Kuley, president of Fairfax County Professional Firefighters and Paramedics. “Your own actuary agrees: There is no problem.”
Kimberly Adams, president-elect of the Fairfax Education Association, opposed eliminating the pre-Social Security benefit, saying it helps keep retirees in the communities where they currently live, resulting in a stronger local economy.
Critics, however, warned the county’s pension obligations are unsustainable in the long run.
Arthur Purves, president of the Fairfax County Taxpayers Alliance, said while the county’s population increased 20 percent since 2000, inflation-adjusted salaries for county employees rose 35 percent, health-insurance payments went up 194 percent and pension costs increased 244 percent.
County real-estate taxes since 2000 have increased three or four times more than the inflation rate, said Purves, who blamed compensation increases as the culprit.
The proposed pension cuts for new employees “are only a small and necessary start,” he said. “You need to look at raises.”
McLean Citizens Association president Dale Stein said county pension borrowing went up $600 million during the last three years and added officials were basing their calculations on average annual returns on investment of 7.25 percent, while returns over the past decade averaged just 5.9 percent.
“We strongly urge the Board of Supervisors to ensure a strong, competitive compensation package for all county employees,” Stein said. “In making those packages possible, the realistic question is, ‘Where in the heck is that money going to come from?’”
A county work group between November 2017 and April this year examined 14 possible pension-plan changes and narrowed the list down to five, but could not obtain consensus, said Supervisor Penelope Gross (D-Mason), who chairs the board’s Personnel Committee.
The work group agreed on the general principles of upholding the county’s defined-benefit pension plans and ensuring pensions for new employees would be sustainable for decades, she said.
“We didn’t wish to create new plans for new employees every few years,” Gross said.
The group also advocated for establishment of a retirement-education template that managers would use during annual evaluations to remind employees to pay attention to their retirement planning, she said.
In addition, the group recommended county officials monitor health-care costs and markets to find options that would reduce retirees’ costs. It also urged the county to develop transfer-of-knowledge and succession planning for employees who enter the county’s Deferred Retirement Option Program.
Fairfax County’s general-employee pension system was funded at 109 percent in 2000, dipped severely in the recession that struck in 2008 and has been hovering at about 70 percent lately, said Supervisor John Cook (R-Braddock). Funding figures now stand at 81 percent for the uniformed-employee plan and 83 percent for the police plan, he added.
County taxpayers now fund 27 percent of the employee plan (with a 5-percent contribution from workers), 39 percent of the uniformed plan (7 percent from workers) and 40 percent of the police plan (9 percent from workers), although that last plan does not include Social Security, Cook said.
County staff recommended to the work group that employees’ contributions should rise by 1 percent, which would have produced pension-plan savings of between 7 and 10 percent, but that option was not among the choices presented to supervisors, he said.