Dear Mayor:

This past Monday, the Senate concurred by amendments to the pension reform bill by a vote of 25-7. However, S-17 must be returned to the General Assembly to concur with the latest amendments.

S-17 mandates all newly elected and newly appointed State and local officials be enrolled in the Defined Contribution Retirement Program. This provision applies to all elected individuals and professionals such as attorneys and engineers. Please note, the focus of S-17 is prospective.  The League steadfastly sought amendments to ensure a general class of local administrative officials who are appointed by the governing body would not be prohibited from membership in PERS and thereby participation in the Defined Benefits Retirement Plan. 

Participation in the retirement program is prohibited to anyone whose base salary is less than $5,000. The League supports an enhanced threshold for enrollment in a Defined Contribution Plan but believes the threshold for Defined Benefits should be raised significantly.

An element that will have impact on all is the elimination of the 4% interest rate on pension loans. This change will provide over a billion dollars of property tax relief and will become effective upon adoption of S-17. These loans will become market rate loans and subject to the commercially reasonable rate as determined by the State Treasurer. The 4% interest rate will apply to any unpaid balance on a loan requested prior to the date S-17 is signed into law.  Currently, there is $1.2 billion in low interest loans from the various systems. The League supports this provision. However, this elimination did not apply to the below mortgage rate loans provided to members of PFRS.

The good news is local employers who participates in the SHBP may now allow an employee to waive coverage under the SHBP if said employee is eligible for other healthcare coverage.  The League supports this provision.

Sections 42 and on deal with limiting the amount of accrued unused sick leave one may receive payment for at the time of retirement. The $15,000 limitation for both civil service communities and non-civil service community is for elected and appointed officials with the exception of those which have been listed before such as the professional license certifications, health officers, tax assessors, tax collectors, etc.

This limitation may then apply to Municipal Managers with regards to accumulated but unused, accrued sick time. But, it would not apply to the rank and file employees which would be governed by the policy established by the local government or their collective bargaining agreement.

The sections deal both with accrued but unused sick time as well as that which is referred to as “supplemental compensation” which we assume would apply to bonuses and accrued vacation time. Supplemental compensation is often in the contracts of school superintendents and sometimes public safety officers have it their contracts.  Apparently, those type payments would be excluded. The accumulation or accrued vacation time would apply with the same definitions as those used for unused sick time.

The Senate amended S-17 to remove the provision which banned dual office-holding. According to the sponsor, Senator Karcher, the issue will be addressed by “broader prohibitions in a stand alone bill.”  

The reformation of tacking and boosting of pension credits was supported and addressed by League in its COPE report.

Further details will be forthcoming after a compromised bill is reached.  Please contact Helen Yeldell at (609) 695-3481 ext. 112, for additional information.

Very truly yours,

                                                                        William G. Dressel, Jr.
                                                                        Executive Director