In their quarterly meeting this morning, the Local Government Employees’ Retirement System (LGERS) Board of Trustees voted to rescind its January recommendation to increase the employer contribution rate and grant a cost of living adjustment (COLA) for current system retirees. Following today’s action the employer contribution rate for general employees and fire fighters will remain at 7.07 percent for FY2014-15. The January vote, which you can read about here, called for an increase in the FY14-15 employer contribution rate from 7.07 to 7.17 percent, which would carry an estimated cost to local governments of $5.5 million. Offering the motion to rescind that recommendation, Board member Jerry Ayscue cited several other new financial burdens local governments currently face as well as his concerns with the LGERS Board taking a different position than the Teachers and State Employees’ Retirement System (TSERS) Board of Trustees, which voted in January not to grant a COLA. His motion was seconded by Mayor Grady Smith of Elm City and supported by remarks from Morganton City Manager Sally Sandy and general public Board appointee John Aneralla. After Ayscue’s motion to rescind prevailed in a 7-5 vote, the Board approved his subsequent motion to keep the employer contribution rates unchanged for FY14-15 in order to meet the Annual Required Contribution (ARC) for pension expenses in the system. The League thanks Ayscue and the other Board members who agreed to support the League’s position to protect the fiscal health of local governments by voting in favor of the motion.
In his legislative preview presentation to both boards, State Treasurer’s Office Policy Development Analyst Sam Watts provided an overview of the Pension Spiking Prevention Act of 2014 that the Treasurer’s Office, League of Municipalities, and Association of County Commissioners have been collaborating to create over the last several months. If enacted, the legislation would help curb the effects of pension spiking on the state and local retirement systems by employing a Contribution Based Benefit Cap (CBBC) formula to identify employees whose contributions do not sustain their forecasted pension benefits. In his overview, Watts explained his office’s intent to possibly raise the proposed average final compensation threshold for running the CBBC formula from $50,000 to $100,000. We will continue to update you on our collective efforts to safeguard the fiscal integrity of the pension system through pension spiking reform. If you have any questions on any of these issues, please contact League Government Affairs Associate Whitney Christensen.