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2014-06-18 / News

Unfunded retirement plan draws ire of budget hawks

By Jim McConnell
STAFF WRITER


Bullis Bullis Five years ago, auditors reported that Chesterfield County Public Schools had a $59 million unfunded pension benefit liability related to its supplemental retirement program (SRP), and called it “a significant challenge to the school system’s financial status.”

“The increased number of participants over the next few years [due to baby boomers reaching retirement age] will dramatically increase the cost of this program,” the auditors noted at the time.

As of June 2013, the program’s unfunded liability had swelled to approximately $70 million. Amid continuing budget concerns, the School Board decided it could no longer offer the supplemental program to any employee hired after July 1 of that year.

But the county’s budget hawks believe the board’s action didn’t go far enough to address auditors’ concerns.

“I know there are people out there who don’t think we should have it,” acknowledged School Board Chairwoman Dianne Smith, who opted to participate in SRP after retiring as principal of Winterpock Elementary in 2011.

Approximately 160 school employees so far have applied to be part of the supplemental retirement program during the 2014-15 school year. That’s only a fraction of the more than 1,400 who currently meet the eligibility requirements, as listed in the school system’s human resources policy manual:

• Retire from a full-time Virginia Retirement System (VRS) covered position with Chesterfield County Public Schools.

• Have at least 10 full-time years of employment with the school system, including the five years immediately preceding retirement.

• Have at least 20 years in VRS or related experience as granted by the school system.

• Be at least age 50.

• Not be eligible for disability retirement.

The school system originally implemented an early retirement incentive program in 1995 to bolster the benefits package it could offer to prospective employees.

Under the program, retiring employees participating in SRP agree to work for one more year, during which they earn less than half of their final annual salary.

Employees who opt for a five-year payout receive 35 percent of their final salary during their “SRP year.” Those who select a seven-year payout receive 25 percent.

The remainder is placed in a trust fund, from which SRP participants are paid for the duration of their participation.

By the end of that period, all SRP participants will have received 175 percent of their final salary in retirement payouts.

For central office staff and administrators earning six-figure salaries, that’s a nice chunk of change. But Smith contends that SRP critics don’t realize the program “is actually a net gain for the county.”

When the School Board considered shelving SRP to save money at the depths of the recession, many local teachers argued that the program saves money by encouraging higher-paid veteran employees to retire earlier than they would have otherwise. They are subsequently replaced by younger, cheaper workers.

Tim Bullis, community relations director for Chesterfield County Public Schools, also downplayed the significance of the school system’s unfunded SRP liability. That number, he said, represents what the school system would have to pay if all of its Virginia Retirement System-eligible employees remain employed in the county and opt to enter the program.

“Historically, between 40 and 50 percent of the employee population does not realize the criteria necessary or chooses not to participate,” he said.

Concerned about its own unfunded liability, Powhatan County’s School Board decided earlier this year to phase out its supplemental retirement program once the 17 school system employees now eligible to participate have completed the program.

Could the same thing happen in Chesterfield?

Chesterfield Education Association President Don Wilms suggested that all school system employees be aware that their supplemental retirement program “could go away at any time.”

That’s not an insignificant concern for Wilms, who expects to be eligible for SRP by the end of the 2014-15 school year.

“If I heard they were going to do away with it, it might spur me to retire early,” he said.

Wilms expressed confidence that as long as Smith and Tom Doland – both retired school employees – remain on the School Board, “they’re going to look out for the interests of retirees.

“But they’re not going to be there forever,” he added.

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