News Column

New law creates a flurry of public employee retirements

September 2, 2014

By Amanda Gray, South Bend Tribune, Ind.

Sept. 02--SOUTH BEND -- A new state law has triggered the early retirement of many local public employees who don't want to see cuts to their benefit interest rates.

The law, which kicked in at the end of August, reduces the interest rate on public retirement through annuity savings accounts for those who choose a monthly payment, instead of a lump sum and retire Sept. 1 or later. According to the Indianapolis Star, the Indiana Public Retirement System expected about 2,000 more retirements statewide, which is up 25 percent from last year. The rate previous to Sept. 1 was 7.5 percent, on that date it dropped to 5.75 percent and it is scheduled to keep dropping until it's at the market value.

Locally, some public offices have been hit with more retirements than normal. St. Joseph County Auditor Pete Mullen said that because of the change three women in his office decided to retire early -- a combined 63 years of work between them.

"One promised me that she would walk out with me at the end of my term," Mullen said. "She came to me and said, 'I'm sorry, but I have to retire.' You can't blame them."

According to the county's human resources Director Queenie Evans, 24 people have retired from May through August this year, compared to last year, when the county saw 10 retirements total.

Between 15 and 20 employees left during the past pay period alone, according to accounts payable/payroll manager Sue Bybee.

Bybee herself is eligible for retirement, but decided to stay. She won't be affected.

"I realized I wouldn't lose anything because I'm not drawing monthly," Bybee said. "If you take the full amount, then it doesn't affect you."

Al Large, director of instructional technology and library services for the South Bend Community School Corp., has retired about two years ahead of schedule.

"Everybody has a different scenario," he said. "You have to figure out what fits your situation. It really depends on each individual."

Large said he attended several meetings for public employees and decided that retiring early was the right choice for him, though he will have higher medical premiums for a short while.

Jo Ellen Talos, benefits manager for the city of South Bend, said the city has logged 29 retirements so far this year. In 2013, it had 17 total.

"Many don't want to see a lower payment, and if you expect to receive benefits over a decade or more, that means losing tens of thousands of dollars," Talos said.

The retirees equal 2.5 percent of the work force in the city, she said. She doesn't see any problem filling the vacancies.

"The retirements are widespread. We're always recruiting, especially in police and fire, to make sure public safety is adequately staffed," she said. "The retirements will not have a huge impact on any one department."

In the county, however, a hiring freeze, combined with widespread retirements, could spell trouble for some departments. County Clerk Terri Rethlake said she has lost six women from her office recently -- four due to retirement because of this law, and two to other jobs.

"We usually have one or none," Rethlake said. "I know several would've rather not retired."

She and several other department heads will meet with some county council members and a commissioner on Thursday to discuss the possibility of some departments getting permission to hire for necessary positions.

South Bend schools, however, aren't experiencing a significant increase because of the law, according to spokeswoman Sue Coney. Neither is the St. Joseph County Public Library, according to their Human Resources director Connie Nicely.

Changes ahead

Indiana state Rep. David Niezgodski, D-South Bend, said that the change is unfortunate for dedicated workers who felt they had a deadline for retirement.

"What we are seeing are workers across this state choosing to retire before that date, so they can get the full benefits that they had come to expect," Niezgodski said last week.

He's been involved with legislation surrounding public employee retirement and other benefits for years. The problem, he said, is how quickly the state is lowering the rate. The interest will drop one more time in the next few years, and the fund could ultimately be privatized by January 2017, if not sooner, Niezgodski said.

He said he hopes that Indiana will decide to keep the retirement plan in-house, which would reduce fees for participants, among other benefits.

The discussion about changing the rate of the ASA plans came up in the 2013 session, Niezgodski said, and implementation was delayed for two years, instead of dropping right away.

A better solution would have been to lower it slowly, over time, if that's what the program needed to stay viable, he said.

Woody Burton, R-Whiteland, chairman of the Indiana House interim committee on Pension Management Oversight, said he and Niezgodski worked on creating the "soft landing" -- delayed rollout of changes -- throughout the 2013 session.

"We didn't bring it back to what it really was, but it's not as low as it could be," Burton said.

But he believes that privatizing may actually give participants better rates over time than what they could get in the state's system.

Burton also said that, though the Public Employee Retirement office says it could see an additional 2,000 employees retire this year, those might not all be because of the changes in the interest rate.

"I also believe that some had planned to retire anyway," he said by phone Thursday.

Niezgodski agreed, but said that, even if half of those who are retiring because of this, it's a problem.

"How do you measure the loss in collective knowledge? I think that's the main thing," Niezgodski said. "You don't normally see that exodus of experience."



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Source: South Bend Tribune (IN)

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