From: Thomas L. Cranmer
221 Donmore Dr
Great Falls, VA 22066-1102
Tel 703-450-6576, Cell 703-447-4494
ThomasCranmer221@gmail.com
November 20, 2018
To: Fairfax County Board of Supervisors
Thomas L. Cranmer is VP, Fairfax County Taxpayers' Alliance; previously one of the previous pension administrators for some of the Mobil Oil Corporation subsidiaries, 'inter alia'; and fellow at the American Center for Democracy.
Thank you for the opportunity to present a summary of my recommendations on reforming the County employees’ pension system. These are my personal recommendations, although I believe the recommendations of Supervisor Herrity and Arthur Purves, President of the Fairfax County Taxpayers Alliance have merit.
Fairfax retirement benefits are far more expensive than those of private companies and even neighboring jurisdictions. Gold plated retirement plans are not fair to Fairfax taxpayers. Fairfax County employees' pension plans have an unfunded deficit of $2.2 billion. Employees can't count on the money being available, and some counties in the U.S. have had to eliminate or decrease payments for employees, including police and fire fighters. Politicians who are in the job for a few years promise big retirement payments in the distant future, knowing they will not be held responsible when the bills come due.
Since 2000, County pensions have increased 244%, but the number of county employees increased only 11%. Fairfax County contributes 27% of employees' salaries to the pension plan, but the private sector companies pay 3 to 4%.
Adopt a 401(k) Plan. Many private companies have dropped defined benefit plans and have gone to 401(k) plans with contributions from both the employer and the employee. Many companies have matching plans (employer matches the employee's contribution) with an upper limit on contributions. Many private plans provide for a fixed employer payment without regard for the employee contribution. The plans often start after an employee has been employed for a period of five years (my recommendation). Fairfax could switch employees to a 401(k) plan fairly by taking the present value of retirement for an employee and easily funding a 401(k) plan for that employee. The benefit is the employee then can be assured the funds will be available for retirement with a vesting (employee ownership) provision. Upon retirement the funds will be available for personal investment decisions and withdrawal for emergencies.
Make the full retirement age 67, in line with Social Security. People are living longer productive lives with the advances in medical care and healthier life styles. To see the Social Security Eligibility schedule, look at page 16 of the Employee Retirement Handbook.
Provide for early retirement starting at 55, with lower benefits. A sliding scale of diminished benefits can be used, similar to the benefit formula on page 20 of the employee retirement handbook. Many companies provide for early retirement starting at age 55, but with lowered pay.
Increase the Rule of 85 to 100. The Rule is the total of age plus years of service. This has been recommended in the attached bill for the Virginia General Assembly.
Eliminate the Pre-Social Security Supplement. This allows an employee to retire at age 55 with nearly 90% of his salary paid upon retirement. It encourages good employees to leave early at great expense to taxpayers, so the employee can get a similar job in another jurisdiction.
Eliminate the automatic 3% per year increase in the retirement annuity. The retirement increase should be equal to the annual rate of increase in Social Security.
Increase the Salary Averaging from 3 to 5 years, without any use of overtime in the calculation. This should help prevent giving salary increases to favored employees in anticipation of their retirement date.
Thank you for considering my recommendations.
Be it enacted by the General Assembly of Virginia:
1. That the Code of Virginia is amended by adding in Chapter 51 of Title 51.1 an article numbered 51.1, consisting of sections numbered 51.1-153, 51.1-155 through 55.1-155.2, and 51.1-216 as follows:
§ 51.1-153. Service retirement.
Normal retirement. -- Any member in service at his normal retirement
date with five or more years of creditable service may retire at any time
upon written notification to the Board setting forth the date the
retirement is to become effective. Any member in service who was denied
membership prior to July 1, 1987, as a result of being age
60
66 or over when first employed may retire
at any time after his normal retirement date and the requirement of
having five or more years of service shall not apply.
Early retirement.
Any member in service who has attained his
fifty-fifth
sixty-fifth birthday with five or more years
of creditable service may retire prior to his normal retirement date upon
written notification to the Board setting forth the date the retirement
is to become effective.
However, a person who becomes a member on or after July 1, 2010, or a
member who does not have at least 60 months of creditable service as of
January 1, 2013, under this chapter shall be allowed to retire under this
subdivision prior to his normal retirement date only if the person is in
service and has attained his
sixtieth
sixty-fifth birthday with five or more years
of creditable service, and the benefit for such person shall be calculated
in accordance with the provisions of subdivision A 3 of §
51.1-155.
Subject to the provisions of subdivision 3, any state employee, teacher,
or employee of a political subdivision who is a member of the retirement
system may retire prior to his normal retirement date after attaining age
50
66 and 30 years of creditable service, upon
written notification to the Board setting forth the date the retirement
is to become effective. The benefit for such member shall be calculated
in accordance with the provisions of subdivision A 1 of §
51.1-155.
A person who becomes a member on or after July 1, 2010, or a member who
does not have at least 60 months of creditable service as of January 1,
2013, as a state employee, teacher, or employee of a political subdivision
may retire prior to his normal retirement date after the sum of his age
and years of creditable service equals
95
100, upon written notification to the Board
setting forth the date the retirement is to become effective. The benefit
for such member shall be calculated in accordance with the provisions of
subdivision A 1 of §
51.1-155.