With the cut, which went into effect at the start of the new fiscal year, the state will no longer match state employee contributions dollar-for-dollar up to $600 per year. The matching plan, which had been in place since 1988, instead was left on the cutting room floor as the state’s General Assembly scoured the budget for savings during this year’s session, according to a Baltimore Sun report.
The move has the potential to impact approximately 50,000 members of the state’s 80,000-person work force who are eligible for tax-deferred retirement programs, said Arthur Caple Jr., executive director of the Maryland Supplemental Retirement Agency. However, of those, only about 40,000 (80%) participate in the programs and will notice the elimination of the match.
This after state employees have already endured their share of belt-tightening which includes no cost-of-living raises in more than two years, and hiring freezes coupled with the continued elimination of vacant positions have meant greater workloads. Last month, Governor Robert Ehrlich Jr announced an additional round of $208 million budget cuts, which included 83 layoffs and 880 vacant jobs slashed.
However, the cuts were necessary, and as Ehrlich spokesman Henry Fawell put it, cutting the match was a better alternative than possible staff reductions. “It was a cost-saving measure that is certainly better than having to consider additional warm-body layoffs,” Fawell said.
Maryland is definitely not alone in its decision, although recent high-profile employer match nixes have been an almost exclusive private employer club. Among them:
- Ford Motor Co.
- Goodrich Corp. (See Goodrich Flattens Company 401(k) Match )
- Goodyear Tire & Rubber Co. (See Employers Strike the Match )
- El Paso Corp.
- Textron Inc. (See Textron Grounding Company’s 401(k) Match )
- CMS Energy Corp.
- Charles Schwab and Co. (See Game Plan: Suspension Bridge )
Further, the move comes from a state that has seen its share of defined benefit travails this year. Just recently, theRetirement and Pension Systemannounced a restatement of its fiscal year earnings after an error was discovered by an outside firm responsible for tracking the fund’s performance (See Maryland Pension Fund Returns Lower Than First Reported ).
This was after Baltimore money manager Nathan Chapman Jr pleaded not guilty to charges of defrauding the pension system and “looting” his own companies in July (See Chapman Pleads Not Guilty in Maryland Fraud Case ). Additionally, a former trustee of the pension system, Debra Humphries, was indicted on perjury charges after she allegedly lied about cash and gifts worth more than $46,000 authorities say she received from Chapman (See “Relationships” Entangle Maryland Pension Fund ).