Recent changes in the rules governing Ohio's Public Employees Retirement System are pushing some government employees into an earlier-than-expected retirement.
However, a major exodus of eligible city employees could put a dent in Marietta's municipal budget.
According to the OPERS web site, among the major changes is tying retirees' annual cost of living adjustment to the Consumer Price Index.
Currently employees eligible for retirement can look forward to a 3 percent cost of living increase annually for the rest of their lives. But for anyone who retires after Dec. 31 of this year that 3 percent guarantee will expire in 2018.
Beginning in 2019 the COLA for all employees will be tied to the Consumer Price Index.
That change is one of the main reasons some eligible workers are considering retirement sooner than later.
Fact Box
New rules for retirees:
Legislation (Senate Bill 343) passed by the Ohio General Assembly in September will have an impact on the future retirement income of government workers in the Ohio Public Employees Retirement System.
Employees eligible for retirement this year will received a guaranteed 3 percent cost of living adjustment throughout their retirement years-if they retire by Dec. 31.
After Dec. 31 all employees who retire will receive the 3 percent COLA through 2018, but in 2019 the annual adjustment will be based on the Consumer Price Index.
Source: www.opers.org
"We estimate that 5,000 of the approximately 43,000 members eligible to retire will do so," PERS spokeswoman Julie Graham-Price said Wednesday.
She said the pension legislation, passed by the Ohio General Assembly on Sept. 12, will go into effect on Jan. 7. Members who plan to retire by Dec. 31 will not be affected by the new law.
"Our retirements have increased incrementally the last few years as the baby boomers are beginning to retire," Graham-Price added. "Most recently, however, retirement inquiries and members filing retirement paperwork has increased primarily due to the pension legislation and OPERS health care changes."
Those health care changes include requiring retirees to pick up more of their monthly health insurance premiums.
The OPERS changes have so far resulted in a handful of Marietta city employees making the decision to retire before the end of the year.
City auditor Sherri Hess said as of this week at least four employees are planning to retire by that date, and a fifth is still considering the move. She added that a total of 11 employees do meet the eligibility requirements to retire by Dec. 31.
"To be eligible for retirement employees at any age have to have served 30 years, or they can be 55 years old with at least 25 years of service," she said.
To receive the lifetime 3 percent COLA through OPERS, eligible employees must retire this year, Hess said.
"They have to be off the payroll by that date," she said. "Those who retire after Dec. 31 will be impacted by the new PERS rules. They may receive annual cost of living raises, but it will depend on how the Consumer Price Index performs."
Wayne Rinehart, project manager for Marietta's engineering department, who has more than 31 years of service with the city, has decided to retire by Dec. 31, although somewhat reluctantly.
"I have 31 years in, and wanted to work for 33 or 34 years," he said. "But this was a choice I had to make. For me it's the right choice, although I feel like they're forcing me to retire."
Rinehart said the new PERS regulations may not be having the desired effect on the system.
"If the premise is to keep people working longer so they can continue paying into the system, it's not working," he said. "People are being forced into retirement and will now start drawing from the system instead of paying into it."
Bill Dauber, Marietta's assistant safety-service director, said the exact number of city workers who plan to retire by the end of the year is not clear at this time, but the city budget would take a hit if too many decide to leave.
"City employees earn or accrue sick time, vacation time and/or comp time which, subject to some maximum limits, is payable to them upon retirement," he explained.
He said those costs are unfunded or not provided for in the city budget, and would have to be added to the annual budget over and above other current employee costs.
"Auditor Hess a year or so ago did a snapshot tally of the unfunded muster out costs for all retirement eligibles pursuant to past planning exercises, and that tally is in the six figure range and is a concern," Dauber said.
If all of the eligible retirees would decide to leave, the city would have to dip into funds needed for current operational programs, he said.
Hess said four or five employees retiring by the end of the year would not be unusual, but it could put a strain on the city if all 11 eligible workers decided to leave.
Dauber said a dedicated fund should be established in the annual municipal budget with enough money to cover all potential retirements for the year, which would help alleviate funding difficulties due to an unexpected surge in retirees.
Some Washington County employees are also considering early retirement due to the PERS change, according to county auditor Bill McFarland, who could also retire this year.
"I'm eligible, but chose not to retire because I'm just not ready, and I like what I'm doing," he said. "I've also made a commitment to the folks who elected me."
But McFarland said he could understand why someone eligible would decide to retire in order to receive the lifetime 3 percent COLA benefit.
"What it boils down to for those employees is 'Do you want the 3 percent for life or not?'" he said.
McFarland noted that the county general fund has adequate assets to deal with costs that would be incurred like sick time, vacation time, or other expenses due to any employee retirements before the end of the year.
