State foils Allegany County’s exit from costly pension plan

CUMBERLAND — In a scenario that would have moved film mafia boss Vito Corleone to tears of joy, the state of Maryland made Allegany County officials an offer they couldn’t refuse. Sure, they said, you can leave the state pension plan — just pay us $6 million first.

County Finance Director Jason Bennett told commissioners the bad news during last week’s work session.

The move was no longer feasible because the county couldn’t afford the exit fee, Bennett said. The county would have the option of cutting a $6 million check or paying the amount over 25 years with interest, Bennett said.

County officials had planned to have all new hires move into a new type of pension plan. Current employees would have remained under the state plan. Offering new hires a defined contribution plan could have saved a good chunk of money in tight budget times, Bennett has said. Bennett said he’d keep discussions open with the state pension officials to see if there was any way around the problem.

The reason for the fat bill is that Allegany County, through no fault of its own, has its pensions 79 percent funded, said Bennett. The $6 million would bring the county to 100 percent funding.

Contributions to the state retirement fund have skyrocketed over the years, Bennett said.

In fiscal 2002, the county sent $575,000 to the state for the retirement plan. For fiscal 2012, that check cut to the state to cover county employees was $1.6 million, Bennett said.

The target date for having a new plan in place would be July 1 and the savings could have come quickly since the county has a turnover of about 23 employees per year, Bennett said.

For fiscal 2013, the county must contribute 8.99 percent for each employee to the state plan. The hope is to move that down to about 5 percent in a defined contribution plan, Bennett said.

The savings in year one to the county could have totaled $27,000 in 2013. After five years, the county could be saving $400,000, Bennett had said.

Allegany County is one of 11 counties in the state still participating in the state employee retirement system for new hires, Bennett said.

A defined contribution plan does not guarantee a specific amount to the employee upon retirement. The result is based upon the investment of the employer and employees’ contributions.

In other decisions, county commissioners voted to donate the Mount Savage Jail to the Mount Savage Historical Society and Beautification Committee. The society has maintained the old jail — unofficially — for the past 30 years. The society had asked to have the property deeded to it.

The 30-member society, which regularly opens the old jail for tours, wants to replace its roof and make some other repairs.

County attorney Bill Rudd has said staff would prepare a “quit-claims deed” for the property to assure that ownership of the jail is properly transferred.

Contact Matthew Bieniek at mbieniek@times-news.com.

Staff writer Kristin Harty Barkley contributed to this story.