New Year could mean new county pension plan

Future Sussex County employees may not have the same retirement benefit enjoyed by the 500 current employees. New employees will likely have to pay into their retirement plans.

Currently, the county pays 100 percent of pension costs; pension funds are a big ticket item in each year's budget. County council recently approved more than $6 million in contributions to the two funds.

To start the New Year, the county's pension committee will explore a pair of options that include employee contributions for new hires to trim the amount the county invests in its pension funds.

The county’s $68 million pension plan is nearly 90 percent funded while a second fund to cover pensioners’ benefits is nearly 75 percent funded. The county has $68 million in its pension funds. Even at those levels, $9 million more is needed to fund the accounts 100 percent, said County Administrator David Baker.

At its Dec. 6 meeting, council approved a contribution of $2.7 million to the pension fund and $1.7 million to the benefits fund. In addition, council approved a plan to place nearly $2 million from the county's $3.4 million surplus into the pension funds. The money will be used to increase the pension funds and cover costs associated with payouts and health insurance to the county’s 183 pensioners.

Under the county's current pension plan, employees are vested after eight years and can retire with 50 percent of their income and health insurance at the age of 62, at 60 years of age with 15 years of service and with 50 percent of pay regardless of age after 30 years of service.

Councilman George Cole, R-Ocean View, said serious consideration should be given to changing the minimum retirement age to 65 years and change the vested service to 10 or 15 years.

“Our pension has to be sustainable for the future,” he said. “We need to be on solid footing.”

Councilwoman Joan Deaver said too much change could create problems with hiring and retaining quality employees. “At those numbers we would not be competitive with Kent County,” said Councilwoman Joan Deaver, D-Rehoboth Beach.

“I don't fall for that argument,” Cole responded. “I think we can start with higher numbers and then tweak it.”

Council has also charged staff to present options for employee health insurance options requiring more buy-in by new employees.

“We are not looking to stiff new employees, but we need to look ahead to what could face future councils. We could have employees with 30-plus years on pensions,” said Council President Mike Vincent, R-Seaford.

“At least we should put this on the table, look at the options and see if changes make sense,” Vincent said.

“We can’t keep up with what we are doing,” Cole said. “It’s not fair to taxpayers if we take exorbitant resources to put into the pension fund, which is a Cadillac plan.”

Cole said the only reason the funds are so close to being totally funded is that council voted to put millions of dollars of real estate transfer taxes into the funds during the building boom in the mid-2000s. “We poured money in to get up to speed. There were many things we could have done with that money,” Cole said.

Michael Shone of Pierce Park Group, the county’s investment consultant, presented council a rundown on the state of the county’s investments. First off, he said, the county did not reach its goal of 8 percent return on investments in 2011. “No one got that it,” he said. “This past decade has been the worst in stock market history.”

The county’s return has been more in the range of 4 percent to 7 percent, which places the county in the top 8 percent of all municipalities.

The county invests 60 percent of its funds in stocks and 40 percent in bonds. “You have the most conservative approach to managing bonds of many of my customers,” Shone said.

Shone said the county should not make any major changes but may want to consider changing its contribution percentages or changing its return assumption closer to 7 percent.

Shone reminded council that based on the size of its investments, a 1 percent decrease or increase equates to a swing of nearly $700,000 to the county.