More on Defined Benefits for Fayette County, GA

If you're not from Fayette County, GA you probably won't want to read this (unless defined benefits retirement plans are a hot button for you).

Last night the committee the County Commission selected to study implementing a Defined Benefits Retirement Plan for county employees asked for more time (Vote on Defined Benefit Plan Vendor Choice Postponed at County Commission Meeting). Since asking for bids in September the group has been reviewing the many, many plans submitted by various companies hoping to get the County's business.

It's big business. It's a carrot with a short stick and a lot of companies are vying to be the ones to chomp down on that juicy veggie. (Hey, I'm the queen of bad metaphors... I'm sure before I finish I'll have you rolling your eyes to the heavens.)

While writing the "official" article for the Fayette Front Page, I went back and reviewed all the times the DB issue has come before the County Commission. They've been looking at it for over a year now. I've been at most of the meetings where it was discussed, or have a tape recording of the meeting. It's boring stuff to listen to and, if you're not in on the committee meetings, it makes not a whole lot of sense without documentation or background details.

However, I've muddled through.

One thing I had thought, but hadn't really researched, was that all the meetings regarding the DB plan were held during business hours. I was right. While there have been a number of presentations to and discussions by the County Commissioners, the public would have had a hard time being at any of the meetings if they weren't willing to take time off from work.

Not only would it be difficult for any member of the public to keep up with all the happenings in regards to the County's DB plan, it's not easy to find out when they're going to discuss it. It's on the agenda, but how many of you go check to see what's on the upcoming agenda? Especially the daytime Workshop agenda?

A lot of people don't even know that it's already a done deal. The Commission voted 4-1 to implement the plan back in December 2007. Commissioner Peter Pfeifer was the ONLY Commissioner to vote no.

During the election Commissioner Herb Frady started saying he had always been opposed to implementing the plan but he voted FOR it... and he said he was for anything that was good for the employees (or something to that affect, I'd have to go back and listen to the tape of the meeting again to give you the EXACT quote, but that's almost exact if not exact). If you go read my story on the Fayette Front Page and wander though the links at the end you'll see a video of Peter Pfeifer and Herb Frady discussing it during the election, the quote is on there.

All that is happening now is that the Committee appointed by the Commission to look into the Plans is trying to decide which company gets the business. Now there is a slim, slim possibility that the Committee will come back and say no, don't do it, but it is so slim you couldn't catch a minnow on the line.

However, while I say it is a slim, slim possibility, it's still possible. There's a group of citizens who've formed a PAC, Fayette Citizens for Open Government (FayCOG), who are fighting implementing the Plan. They don't feel that there have been enough open meetings and public input. They're asking for hearings and citizen involvement. You can get involved with FayCOG, or you can send your own emails and letters. You can come to the next meeting and voice your concerns.

Why, you might ask, should this involve the citizens of this county? Well, I might answer, it's going to cost the taxpayers a bundle in a few years. Your taxes are going to rise and / or some things aren't going to happen that should just to pay for benefits for employees.

The employees have a great retirement plan already. It's one that isn't going to drain the bank and it's not risky.

We're watching the auto bailout fiasco going on right now. A huge part of their financial woes are related to the dream benefits the employees have at the once-big 3. Everyone is running away from DB retirement plans because they are financially back-breaking. Yet here in our county we're embracing the failed plan and going in the opposite direction.

The bill is going to come due at some point. For the first few years things will run smoothly, then it's going to become a growing bubble that will burst when least expected.

I've been writing about this for over a year. It's bad news for the future of our county and it seems that not many are paying attention. At the very least, the County Commission should hold off with this taxpayer hold-up until after the financial crisis passes.

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Vote on Defined Benefit Plan Vendor Choice Postponed at County Commission Meeting
12/12/08 It appeared that County Commissioners were surprised when the newly appointed Fire and Emergency Director, Allen McCullough made his presentation regarding Defined Benefits. McCullough heads up the committee which is studying which company to select to provide and manage the Defined Benefit plan the County voted to implement last year (Dec. 5th, 2007; approved 4 – 1 with Commissioner Peter Pfeifer voting in opposition)... More

Christmas for some, coal for the taxpayers...

Last night’s County Commission meeting was jam-packed with headline making happenings. Unfortunately (or fortunately….) I was off making money selling my pottery and had to miss the meeting. However, I do have audio from the meeting and have talked to a number of folks who were there, and I asked for and received copies of some of the statements made by concerned citizens.

Three topics caught my attention in particular. Defined benefits, the increased cost of the emergency “bunker” (as it’s been nicknamed) and the Sheriff’s proposed purchase of new guns.

In this blog, I’m going to focus on the defined benefit (db) program and on one of the speakers who addressed the Board last night. It’s Christmas, I don’t want to tax you with a long blog. You’re gonna be taxed enough as it is with all your Christmas shopping, the increase in taxes the current Board dropped on you and the increase in taxes you’ll see once they implement the db program…

Former Senator Rick Price (who’s also a past County Commission Chairman) spoke against the proposed db program at last night’s meeting. He presented a list of ten questions regarding the program. Just as a bit of background on the Senator, he is a financial planner. He knows his stuff. Thus he has the benefit of looking at the idea of the db program from multiple sides. He’s been in the hot seat on the Commission, he’s been in politics at the state level and he has an intimate knowledge of the financial world.

Currently county employees have an award-winning defined contribution retirement program. Some of the Commissioners and the Interim County Manager are pushing hard to switch to a db program. They put together a handpicked committee of employees and an attorney (who doesn’t deal at all with db programs or anything related) to “study” the feasibility of switching to a db program. The committee worked with the group that will get the county’s business if they’re successful in selling the program to enough of the Board to “study” the issue… sure, right, sounds good to me, too.

From what we’ve seen thus far, the program is a shoe in and county employees are going to get a really nice Christmas present. The taxpayers are the ones who’ll be left holding the proverbial stocking full of coal, one we won’t deserve to have foisted on us.

Here are Senator Price’s ten questions. What do you want to bet that we never see a response to them? Or, if we do, they’re answered in rosy gloss-over-the-fact prose by the guys who set the program up for Henry County (huge unfunded liabilities to the tune of millions and millions) who’re now trying to sell the program to the Fayette County commissioners?

Here are his questions:

As a taxpayer of Fayette County, I am requesting the Board to respond to my written questions below as individual Commissioners and/or as a group BEFORE a vote is taken on implementing a Defined Benefit Retirement Plan.

1. Is the board going to vote to implement a benefit plan change of any type before the end of 2007?

2. Will you vote to implement a Defined Benefit Retirement Plan WITHOUT a series of PUBLIC MEETINGS once the board has made a decision to implement a Defined Benefit plan?

3. Can you explain why this Board has not hired an independent pension consultant?
(NOTE: When the Board enhanced the existing Defined Contribution Retirement Plan in 1995, the Board hired an independent consultant to evaluate options for plan design, cost and eventual coordination of the bidding process and finally, the selection of a new Defined Contribution Plan company.)

4. Please explain why this Board has as their stated goal that Fayette County Employees retire with 100% of an employee’s pre-retirement salary. Please name any major private sector employer who has as their stated goal that their employees retire with 100% of their pre-retirement salary.

5. Please explain why this particular board is willing to commit future boards and taxpayers to the unfunded liabilities that are prevalent in most government defined benefit programs. See attached.

6. Is the Board aware that constitutional officers, (Sheriff, Tax Commissioners), firefighters/EMTs and other certain public safety employees have Defined Benefit Plans also have available to participate in, i.e., the Georgia Firefighter’s Pension Fund and the Peace Officers’ Annuity & Benefit Fund of Georgia? These additional pensions are funded by additional surcharges to fines and fees that taxpayers pay. Some are voluntary and some are mandated by the state legislature.

7. In your research, are you aware of Henry County’s Defined Benefit Plan shortfall? Are you aware that Henry County implemented their Defined Benefit Plan 4 years ago and now has a $25 million dollar “unfunded liability” that falls on the Henry County taxpayers? See attachment.

8. Can the Board explain why most major corporations in general, and Delta Airlines in particular, have frozen or cancelled their Defined Benefit Retirement Plans but Fayette County is reversing this trend by planning to add a Defined Benefit Retirement Plan?

9. Is the board aware of the possible negative exposure a county employees spouse or beneficiaries may have by participation in a Defined Benefit Plan versus the current plan?

10. Please review the attachments that show three local governments whose audits show that even though the are funding their annual dollars (at 100%) that actuaries advised, they all have shortfalls that will have to be paid by the taxpayers. Will this board show the true cost of a defined benefit plan?

Respectfully,
Rick Price

The Tax Hike Cometh…

Oops, goofed, the tax hike has already cometh… However, if you think the County’s tax increase this year is something, wait until the County Commission votes to implement defined benefits for county employees!

The County seems hell bent on doing what every other large business has been forced to dump if they planned to stay in business. Companies across the nation have found it impossible to fund the kind of retirement program the County wants to put in place. They’ve gone into bankruptcy; they’ve run to the government to help, they’ve closed their doors.

And it’s not just private companies (like IBM, General Motors, Delta Air Lines, etc.) who’ve had huge problems with trying to pay the bill for defined benefit type retirement. Counties and cities are having to go back to taxpayers to fund bloated defined benefit programs.

At a time when so many are crashing and burning in large part due to defined benefits, the County is looking to grab onto the golden tether and ride the horse straight into our pockets. Yep, that’s where all this is going to end up, with taxpayers having to pony up the funds to cover benefits for employees who’ve long since moved on to other jobs, states, countries...

Right now, it looks like the county is getting ready to commit to a defined benefit system that is raising taxes across the state and beyond.

Who’s giving them advice on this plan? From everything I’ve seen at the meetings and heard from others in the know, the company that will ultimately get the business is providing all the studies, data and info. Oh, and a committee of employees who are getting close to retirement and one outside attorney who has absolutely no knowledge of retirement systems and said so during his first briefing to the Commission.

I’ve talked to umpteen insurance types, financial wizards and the like about defined benefits. Every single one, no exception, basically said “RUN” in the other direction if someone starts talking defined benefits. I’ve been on the Internet searching for someone who says something good about a defined benefit program. The only folks saying they like it either work for or are affiliated with someone who’s also selling benefit programs. Find a think tank who says it’s a good idea… find an independent financial wizard who says it’s a good business decisions… If it’s a bad business decision doesn’t it stand to reason that it’s a bad decision for the government to expect us to fund this type retirement?

Here’s my prediction based on the information that abounds on this issue: We’ll be fine for a few years. All will be rosy and everyone will sing merry songs and give glowing reports. Then the County will have a wave of retirements. They’ll scramble a bit to cover the unfunded liability. It’ll grow. And grow. By the time the next change of command on the Board of Commissioners the county will be in a deep hole with no way to dig itself out. There will be some major scrambling to try and figure out how in the world to pay benefits for those who only worked for the county for five, six and seven years. They’ll do without some recreation, they’ll do without some needed road improvements, they’ll cut back here, cut back there… and raise our taxes ‘cause there ultimately won’t be any other way to cover the tab that will grow exponentially as more and more hit retirement age.

I worked for the government for 14 years. I had both a defined benefit retirement and a 401K plan. I didn’t appreciate it while I was there, but boy I love it now. I understand why everyone would want a defined benefit retirement plan. It’s there for a lifetime if you don’t cash it out. However, my 401K would do the same thing. In fact, I rather like it better. When I die, my husband or my kids will get whatever I didn’t use. The defined benefit? It doesn’t belong to me. It belongs to the government. They’ll give the money I paid into it to someone else.

One of the reasons for moving to a defined benefit system that is touted is that it makes the county government competitive. Well gee, I guess it’ll make ‘em even more attractive now that every other company in the world is ditching their defined benefit. I would argue that for most of us it’s things like salary, health, location, and the job itself that attract us. Until most hit their 40s or 50s they’re not thinking much about retirement. If they are the type that does, many would be happier (or as happy) with a 401K or the system the County currently has. Who wouldn’t like to own their own future? Who doesn’t like the idea of the company matching their contributions? Managed correctly a 457 or 401 can out-perform many retirement systems and it doesn’t go away the day you die.

We need to make sure county employees aren’t stuck out in the cold when they retire. We can’t expect them to live on Social Security alone. A good percentage of county employees are socking money away for their future under the current program. Some aren’t. Some of those are young and aren’t yet thinking of that day in the future when they’ll retire. Some have spouses who are making sufficient money that they’ve opted to take every penny of their salary. Some who aren’t contributing to the current retirement program won’t want to pay their portion of the defined benefit program either if it means a decrease in their take-home pay.

[[[[Just in case you're wondering what the difference is between a defined benefit retirement plan and a defined contribution plan like the County currently offers here's easy to remember definitions: defined benefit: controlled by others and they tell you what you'll get; defined contribution : you own it, and put your own funds into it. Usually companies do a match with a defined contribution plan]]]]]