While many public and private funds are having issues with underfunding, supporters of the Fayette County proposal contend its plan will avoid that problem, Thecitizen.com reports. Under the proposal, employees would earn a monthly retirement benefit equal to 1.5% of their salary for each year of county service with a maximum of 30 years – meaning the maximum the program will pay an employee is 45% of their salary, the news report said.
Current county employees will not be credited for any time served before the plan goes into effect, but employees will be allowed to “buy back” credit for years of service with funds from their current retirement accounts. Employees would be vested in the program with five years of service and would have the possibility of assigning benefits to a spouse upon death.
Employees will be required to contribute 2.5% of their salary to the plan, according to the news report. Officials noted that the most the county would provide an employee is about 27% of an employee’s salary during retirement, with the remainder being from employee contributions.
The plan was also designed so that if the county’s contribution exceeds 4% of all salary for a given year, the county will shrink the amount of funds it contributes to employees’ 401(a) and 457 retirement plans to cover the difference.
The plan does not include any cost of living adjustments.
According to Thecitizen.com, county officials are considering the pension plan to help retain employees, as exit interviews from departing employees have cited the lack of a solid retirement plan as one reason they left.
An actuarial study performed for the county determined that if the pension fund invested half in stocks and half in bonds, there is a 75% chance the county’s highest contribution over the next 20 years would be no more than 4.6% of payroll, and a 99% chance the average cost would be 3.8% of payroll or less. The study was calculated based on “randomly selected annual returns” on stocks and bonds from 1905 through 2004, according to a letter from actuary Clark Weeks of WRS Benefits, the news report said.