The Senate’s idea to offer early retirement incentives to employees as a way to save the government some money seemed to have backfired Friday, as Government Employees Retirement System board members said the proposal would immediately put them $11 million in the hole.
Employees with 30 or more years of government service would be given $10,000 to retire early, or else would have to contribute an extra 3 percent into the system if they stay on the job, according to the proposal, which is now law. GERS Administrator Austin Nibbs said after the meeting that senators knew what impact the provision would have on GERS when they passed the bill.
In his report to the board Friday, Nibbs recommended that board members consider raising the retirement age to 62 — much like the controversial proposal in France that last year caused riots — or implementing a 3 percent increase in the contribution rates every five years to help keep the system balanced.
Another drawback of the new law is that if all 661 eligible retirees were to take the incentive, the system would not have enough staff to process the requests by the Aug. 15 deadline set forth in the bill, said Sharon Sasso, GERs’ director of member services. Board members suggested that they write to the Legislature to see if senators would consider any amendments or allow the employees to submit their intent to retire by Aug. 15 and give the system more time to process the requests.
GERS’ shaky financial position was also discussed when board members considered whether to continue paying incremental cost of living increases to employees 60 years and above that have been collecting an annuity for at least a year. Nibbs said the COLA would cost $2.1 million this year that GERS does not have, so he recommended that it not be paid.
Board members said they understood that Nibbs was looking out of the system’s bottom line but could not agree with forgoing the COLA for 2011. Board member Edgar Ross said that if the system was more unstable because of the Senate’s bill, then the Senate should appropriate the money to make up the difference, instead of forcing the retirees give up something they look forward to every year.
Ross made the motion to implement the 1.5 percent COLA in retirees’ end of the month paychecks. Voting to approve the motion were board members Wilbur Callender, Carver Farrow, Raymond James, Ross and Leona Smith. Board members Desmond Maynard and Vincent Liger abstained.
Board members also approved motions:
- making it mandatory for younger members to receive their annuity payments through ACH, or direct deposit, starting Oct. 1, 2011;
- to send requests for proposals to five firms selected as finalists for the position of investment consultant to the board;
- that makes GERS the lead plaintiff in a case against BJ’s Wholesale Club.