Fiscal Impact Of Pension Changes Debated In OC

OCEAN CITY – A fire was lit in council chambers this week as discussions turned to the changes made to town employee benefits and what it is costing the town today rather than in the future.

Finance Administrator Martha Bennett asked the Mayor and City Council for an approval of the annual contribution to the pension and Other Post-Employment Benefit (OPEB) fund as council members began to debate the pros and cons of changes made to town employee benefits a year ago.

Bennett started off by explaining that during the Pension Trustees meeting on Nov. 9, 2011 it was voted unanimously to make the actuarial recommended contributions to the Public Safety Pension Plan, General Employees’ Pension Plan and Other Employees Benefits Plan, or retiree health insurance, for the 2012 fiscal year, and that the actuary revised the public safety contribution in January based on an ordinance to amend sick leave credits, reducing the amount by $80,005.

Bennett furthered that the pension contribution is about $3.4 million for the public safety plan, which is less $1 million contributed in September and about $2.5 for the General Employees Plan. The amounts are calculated using a 10-year level dollar amortization method on an open gain/loss basis.

Bennett concluded that the recommended actuarial contribution to the Other Employees Benefits Plan, or retiree health insurance, is $3,675,000 and is budgeted.

Councilwoman Mary Knight pointed out that the town has lost $692,000 due to investment losses from closing the former benefit plan versus an open amortization method.

Councilman Joe Hall asserted that the liability amount of $692,000 is not a new bill.

“It is just accelerated payment plan more than what it was when it was done with the open plan,” he said.

Bennett said that he was correct but new hires typically have an amortization gain because in the new plan they don’t get full benefits until after 15 years.

“I would say it costs slightly more for those people in an early retirement plan for initial new hires,” she said.

Knight clarified that her point is that it is a higher cost for today’s taxpayer.

“The $692,000 that we have to make up very well could have been put someplace else in this economic environment with everybody’s assessments down,” she said. “We did not need to spend this additional $692,000 with the ordinances that were passed last year to close the pension plan.”

Council President Jim Hall disagreed with Knight.

“What we are talking about is paying it now or paying it later and our theory was let’s start paying it now and that is why we closed the plan,” he said.

Joe Hall added that the bill has been created by town employees that have already retired.

“The bottom line is it’s the kind of government that you want,” he said. “Do want us to keep racking up the bill for the future or do you want us to be a responsible community and pay bills as you go? … we could have put this off but it’s not right it’s only going to build … it is a better way to keep Ocean City competitive in the future.”

Mayor Rick Meehan whole heartily disagreed with the majority’s argument in accelerating the payments as a more conservative approach.

“That $692,000 could have been used to pave streets and today’s taxpayers could have enjoyed those streets,” he said. “It was programmed out to be paid over a period of time so those that were here paid as it was being paid off. You accelerated the payment so it is an added cost for the people that are here today that have to do this. It is a different way to do business but I don’t want it to be assumed that just because that is the way that you chose to do it that that was the right way.”

3 comments on “Fiscal Impact Of Pension Changes Debated In OC

  1. Have to agree with Mary and the Mayor, could have been done differently but some closed minded individuals chose to increase the burden on the people who have trouble taking care of the financial duties already in front of them. Sad bunch these 4.

  2. I again have to agree with the Mayor and Mary. It’s the same case as allot of the problems set before the same 4 council members are just determined to have their way.They appear to ignore the other councilmembers. I can’t wait till October,. I’m sure there are many other citizens that feel the same way.The town is begining to be known as the “Lost Town of Ocean City, Md.” All because of the 4 council persons.Thank You..Grace

  3. OMG It is costing the taxpayers, $692,000.00 for this pension plan decision plus approx. $300,000.00 for the Dennis Dare decision. Do the math! I wonder how much more damage can be done before October 16? We must get out the vote!

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