Resort To Slash Retiree Benefits

OCEAN CITY – During this week’s Mayor and City Council’s presentation of benefits and compensation study, town employee retirement benefits became a heated topic, as the council began eliminating the benefits from all directions.

The town recently offered a retirement incentive to employees in attempts to persuade some into retirement. According to the presentation, the incentive was offered to 84 town employees and only 37 accepted.

The council began its attempts to save costs by contemplating whether the correct contribution plan is being offered to town retirees.

Councilman Brent Ashley suggested in a motion that a Request For Proposal (RFP) be placed to have investment groups come forward and explain what would exactly be entailed in setting up a certain benefit plan, as far as the pros and cons in each benefit and what the expenses would be and how each benefit would actually work.

Councilman Joe Hall seconded Ashley’s motion, saying, “I would like to stick with a RFP and reach out to financial advisors to have the capability to get all the information.”

Councilwoman Mary Knight proposed that the town begin with an actuary study. She stated that if the council brings in independent investment companies, then they are just going to provide their opinion.

“What you need to do is look at our [Ocean City] specific case, see how it will help or hurt us, and look at the numbers,” she said. “I don’t want opinion, I want actual figures, and numbers to help us make this decision on whether or not we should change our retirement benefits.”

Joe Hall rebutted that the first step would be to hear from financial advisors and then have an actuary study performed.

Councilman Lloyd Martin added that a RFP is also going to cost the town additional money, which the council is obviously trying to avoid.

“We have reduced our employees some, and if we continue to right size the government, and we’re moving in the right direction to get where we need to be,” he said. “Don’t try to break something that is working.”

Joe Hall argued that the actions that are already being made are not going to work in the long run.

“This RFP will allow an independent group to come in here and explain how the government, and governments across the country that have 401K plans, explain how it works and what the costs ensue,” he said.

Council President Jim Hall stepped up and asserted that the popular vote among the council was in favor for installing a 410K benefit.

“The votes are here for a 401K, let’s just vote on it,” he said.

Ashley and Joe Hall then withdrew their motion of bringing forward a financial advisor to decide which benefit plan would suit the town better. The new motion was placed for the town to switch to a 401K defined contribution plan and then have the experts come forward and implement the change.

Councilman Doug Cymek and Knight felt that installing a 401K defined contribution plan without researching the pros and cons is “totally irresponsible.”

The motion to install a 401K benefit for new hires was passed in a vote of 4-3, with Cymek, Knight, and Martin in opposition.

The next retirement issue came onto the agenda again a couple hours later, concerning the ICMA 457.

In recent years, the town offered ICMA 457 deferred compensation plan with a limited match contribution. The most recent change to this benefit was the town would only match up to $200 a year, changed from $500.

Pillas made the motion to eliminate the ICMA $200-a-year match completely for new employees. Her motion was second by Ashley and passed in a vote of 4-3, with Cymek, Knight and Martin in opposition.

The final motion of the night concerned retiree health coverage and seemed to catch everybody by surprise.

Pillas made the motion that for new employees hired that there will be no retirement health coverage offered and was second by Ashley.

In years prior, retiree medical insurance eligibility after 15 years changed to 25 years if hired after 2005, with the town covering 80 percent and the individual covering 20 percent of the cost share, for the employee only.

“I want to be as fair and as equitable as possible to the employees to get the job done but once they [town employees] retire I think the town should be done with them,” Joe Hall said. “The future of the council should not have to be funding people that no longer work for the town, its unsustainable.”

The audience responded in shock to Hall’s harsh language and couldn’t help but to laugh out loud.

“This town is made up of retirees and the people that came out and voted this year were retirees…they’re getting benefits from their job that you’re trying to take away,” Martin said. “This town is their business, they put their heart and sweat into it everyday…the people that are working in this town are number one.”

Martin’s rebutted response to Hall’s notion received a standing ovation. However, the motion passed in a vote of 4-3, with Cymek, Knight, and Martin in opposition.

Pillas also put into motion that in future work session information concerning reducing the liability on current employee retirement health insurance needs to be brought forward, which also passed.