ROCKVILLE, Md. - The Montgomery County Executive's office is expected soon to recommend the County Council adopt legislation freezing the current $1.2 billion defined benefit pension plan and setting up a defined contribution plan for non-unionized workers hired after July.
The proposal is aimed at shaving the county's employee benefits costs, and offering portable benefits, said Philip H. Marks, management specialist for the county.
The county projects savings of $1.4 million over the next six years, assuming 600 new hires in that period. The county now has about 6,500 employees.
"In the short term, the difference would not be substantial, but over the long haul we think it would have a significant impact, and clearly there would be no issue of unfunded liability," Mr. Marks said.
The $1.2 billion Montgomery County Employees' Retirement System is underfunded by 18%, he said.
Under the new defined contribution plan, the county hopes to slice total retirement benefit costs for firefighters and law enforcement officials to 18.5% of payroll, from the current 19.41%. The county's share will total 14.64%.
For all other employees, the county hopes to bring down total retirement costs to 11% of payroll from 12.23%, and slice its own share of costs to 7.7% from the current 9.23%
The county hopes to have the plan in place by January 1995.
Current employees who want to move into the defined contribution plan will be able to do so six months after the plan is up and running.
The county decided to switch to a defined contribution plan after analyzing a Department of Labor report published some years ago that reported a shift in public sector funds toward defined contribution plans.
The county also hopes to save money because the defined contribution plan will not pay disability pensions for employees who become. Under its current retirement plan, the bulk of the costs for providing long-term disability benefits are borne by the pension fund.
"The way our plan is structured, most of the benefit is paid out of the retirement system, rather than taking money out of the long-term disability program," Mr. Marks explained. "It probably covers 90% or 95% of the benefit to the employee," he added.