Vote cuts pension checks for retirees
HOLLIDAYSBURG — About six months ago, the Blair County Retirement Board voted to cut the percentage being used to calculate part of an employees’s monthly pension payment, based on money the employee contributed. Instead of 7 percent, the board agreed that 4 percent would be used.
And since that vote, the change has been hitting home with employees deciding to retire and those thinking about retiring.
It means $207 less a month for one man who retired earlier this year after working almost 18 years for the county.
For another retiring employee, the change would have meant $248 less a month. But he was able to beat a deadline and avoid the loss.
Blair County Controller A.C. Stickel, who serves as secretary/treasurer of the retirement board, said he made about 10 calculations reflective of the change.
“The biggest was slightly over $200, maybe $220. … But one was as little as $15 a month,” Stickel said.
Still, any decrease in the employees’ monthly pension payment is going to add up over time, said Altoona attorney William J. Haberstroh, who is researching the legality of the county’s actions on behalf of three people who turned to him for advice.
“County salaries are not known to be substantial, so even the loss of a few bucks a month to some of those folks can be pretty significant,” Haberstroh said. “For the people I’ve talked to, based on their life expectancy, losing $200 to $300 a month is $60,000 to $70,000.”
Haberstroh said he’s not at a point where he is ready to advise the employees, nor he is ready to take any action on their behalf.
“I’m still at the stage of looking into what can be done,” the attorney said. “And even if the facts indicate (the county) can do what they did, that doesn’t mean it was the right thing to do.”
County retirement board members, after their June meeting, defended their December vote when asked about the resulting decrease in future pension payments for newly retired and retiring employees.
“This was done for the good of the taxpayer, the good of the county … and the future of the pension fund,” Stickel said.
In December, the retirement board composed of Stickel, commissioners Bruce Erb, Terry Tomassetti and Ted Beam Jr. and Treasurer Jim Carothers, cast a unanimous vote in favor of starting to use the 4 percent interest rate — instead of 7 percent — to calculate a monthly annuity for retiring employees.
The interest rate applies only to the a portion of the pension calculation based on money contributed by the employees. And employees have the option, the retirement board members said, of removing that money from the fund and investing it elsewhere.
Erb, who chairs the retirement board, said he sees the interest rate reduction as an action in favor of the county’s taxpayers.
Before December’s vote by the retirement board, Erb said the county was guaranteeing a 7 percent return on the employee’s contributions that would be part of their monthly pension. Comparable options available at private investment companies, Erb said, are available at a 2 to 2.5 percent.
Haberstroh counters that if those same private investment firms had held onto someone’s money for years like the county does, then it’s likely a future annuity would yield much more than 2 to 2.5 percent.
That may be true, Erb said, but the difference is that the county’s 4 percent is a guaranteed rate.
“And interest rates haven’t been at 4 percent for a very long time,” Erb said.
Haberstroh said he sees December’s actions by the retirement board as another way for the county to address a problem that surfaced when the county made no annual contribution or failed to meet its annual contribution to fund the pension.
“They’re placing the burden for that underfunding on the backs of the employees who have done nothing to contribute to that underfunding,” Haberstroh said.
The 2016 audit pinpointed the underfunding at $89 million, and a report reviewed in February 2016 showed the potential for the $34 million fund to run out of money in the 2020s. If that happens, then the county would need to turn to its general fund to cover pension payments.
“Our county’s pension plan is guaranteed by the county only,” Erb said.
“People like to think their pension fund can’t go bankrupt,” Stickel said. “But it can.”
In addition to smaller pension checks, newly retiring employees say they should have had advance notice of the pending change to use a lower interest rate.
“If they would have just told people last year, then we would have known what was going on and could have used that to make a decision,” said a currently employee now trying to figure out if he can afford to retire on a smaller check.
Unlike pension plans subject to federal and/or state regulations, the county’s pension plan is governed by the state’s Act 96 of 1971. A review of that document by the County Commissioners Association of Pennsylvania acknowledges that the act “requires very little information to be provided to county employees.”
When questioned after their June meeting, retirement board members said they thought the actions in December were warranted and permitted within the state’s governing act.
In hindsight, Tomassetti said the board could have postponed the December vote so employees had time to consider the change. But Tomassetti reiterated that employees also have the option of withdrawing the money and finding an alternative investment. He also mentioned that factor in December as a basis for casting his vote in favor.
Mirror Staff Writer Kay Stephens is at 946-7456.