Pension Changes Under Consideration

OCEAN CITY- The recently passed collective bargaining agreement this week resulted in an amendment to Ocean City’s public safety employees’ pension plan, ultimately defeating the benefit changes the former council made a few years ago.

In accordance with the ratification of the collective bargaining agreements with the Fraternal Order of Police (FOP) Lodge 10, the Mayor and City Council on Monday evening considered an ordinance to amend benefits paid to permit participation of new police employees in the Public Safety defined benefit (DB) pension plan and change the benefit for employees hired after July 1, 2011.

The ordinance states, from negotiations with the FOP, it has been determined that the best interest of the public is served by allowing sworn police officers to participate in a DB pension plan. The Mayor and City Council have devised a DB plan, which has a financial impact relatively similar to the cost of a defined contribution (DC) plan.

Under the proposed ordinance, Ocean City’s Public Safety Employee Pension Plan and Trust under Normal Retirement Benefits is amended in different ways. Participants who are covered employees by virtue of being sworn police officers hired after June 30, 2011, shall be enrolled in the plan as of July 1, 2013. The amount of the monthly pension will be the sum of 60 percent of the participant’s average compensation reduced by one-three hundredth of the amount computed for each month less than three hundred in his/her periods of credited service, excluding periods of credited service attributable to sick leave credits, as of his or her termination of employment.

In addition, one-twelfth of two percent of the participant’s average compensation multiplied by months in his/her periods of creditable service are attributable to sick leave credits.

The normal retirement benefit is based upon the participant’s attainment of age 55 and completion of 25 years of service and the participant contributing eight percent of his or her annual salary to the date of retirement or the date on which a DROP participant terminates employment.

Those participants shall no longer participate in the ICMA Retirement Corporation Government Money Pension Plan and Trust and his or her accrued benefits under that plan shall be actuarially converted and, along with the corresponding assets, be transferred directly to and merged with this plan and used to fund the participant’s benefit accrued under this plan.

Councilman Brent Ashley, who was part of the former council majority who voted to change the pension plans a few years ago to take care of pension costs in the present versus taking on long-term debt, was a lone wolf when it came to debating the ordinance.

“Virtually every city in the country as well as the federal government is looking for ways to reduce long term debt and enact pension plan reforms,” he said. “Ocean City was one of the first cities to achieve this with the adoption of an excellent 401(a) pension plan for new hires. And now, despite the success of the 401(a) plan and a large unfunded liability in the public safety defined benefit plan, the FOP and the majority of this council want to go back to the defined benefit plan further increasing our long term debt. This decision will kick the debt can further down the road for our children and grandchildren to pay.”

Council President Lloyd Martin responded it was three years ago when the former council majority voted to change the city’s pension plan for new hires without discussion or knowing the costs.

“We heard from our actuaries at that time, that some people had changed from a DB plan to a DC plan, and a year later they changed back because they found it wasn’t prosperous,” Martin said. “I understand there has been towns that have gone back and forth and around in circles. I just look at Ocean City being fiscally responsible with looking out to the future. We are trying to do it now with these changes, try to save money, and trying to make sure our employees are taken care of moving forward.”

FOP Lodge No. 10 President Shawn Jones reassured the council this is what their membership called for.

“Prior to sitting down at the table, once we realized where the discussion regarding pension was going, we went to each individual member who is affected by this and all of them unanimously said they would like to go into the DB plan,” he said.

The council voted 5-1 to approve the ordinance to amend public safety employees’ pension plan in first reading with Councilman Brent Ashley opposed and Councilwoman Margaret Pillas absent.

Ashley asked Mayor Rick Meehan to consider vetoing the ordinance as he had done in the past when the former majority was making changes to city employee pension plans for new hires without an actuarial study. However, a veto cannot take place until the ordinance passes in second reading.

“I will just lay the groundwork then,” Ashley said.