Maryland officials discuss pension, health benefit changes

State officials were in Hagerstown on Monday to discuss the newest changes to the pension and health benefits systems.

Del. Andrew A. Serafini, R-Washington, organized a forum on those topics at South Hagerstown High School.


About 60 people attended the event.

From the Maryland State Retirement Agency, Executive Director R. Dean Kenderdine and Director of Legislation J. Howard Pleines attended to talk and answer questions.

Anne Timmons, the director of the Employee Benefits Division for the Maryland Department of Budget and Management’s Office of Personnel Services and Benefits, also spoke.

Maryland has struggled in recent years with unfunded liabilities estimated at $19 billion for pensions and $16 billion for retiree health coverage.

As of June 2010, the pension system was funded at about 64 percent; 80 percent is considered a safe level.

During the 2011 legislative session, the General Assembly changed the pension plan so state employees and teachers would pay 7 percent into the system, instead of 5 percent.

The cost-of-living-adjustment (COLA) had been linked to the Consumer Price Index (CPI), with a cap of 3 percent a year. Under the amended structure, for all time accrued after July 1, the COLA still is linked to CPI, but is capped at 2.5 percent if the system hit its assumed rate of return and capped at 1 percent if the rate of return is not met.

Other changes put in place — for future employees — include a 1.5 percent multiplier (times years of service), down from 1.8 percent, and 10 years for vesting, up from five years.

Changes to the state’s various pension systems are explained in detail at the Maryland State Retirement and Pension System’s website. (Go to www.sra.maryland.gov and click on “Summary of Pension Reform Changes Effective 07-01-2011.”)

Responding to a question from the audience, panelists acknowledged that the pension plans for legislators, judges and former governors were not changed this year.

Kenderdine said those systems, according to the state constitution, are set by compensation committees.

Serafini said Randy Changuris’ recent letter to the editor of The Herald-Mail, calling it “unconscionable” for lawmakers’ pensions to get that protection, was “dead-on.”

Serafini said he and another delegate introduced a bill last year to include lawmakers in the state employees’ pension system, but it was met with bipartisan opposition, which disappointed him. It’s questionable whether part-time legislators even deserve a pension, Serafini said.

Other audience members asked about the pension system’s rate of return in past years and about lawsuits in other states that could potentially overturn “guaranteed” benefits.

Kenderdine said the Maryland attorney general’s office has advised that changing benefits already earned would be reneging on a contract.

This year, the General Assembly approved an increase in out-of-pocket costs for prescription benefits, which had been capped at $700 for retirees and active employees.

Under the new system, effective July 1, the out-of-pocket caps for active employees will be $1,000 per individual and $1,500 per family. For retirees, the caps are $1,500 per individual and $2,000 per family.

Timmons said active employees might have been shielded more this year because of furloughs and salary reductions they’ve faced in recent years.

Changes to the state’s retirement and prescription plan systems are included in summaries posted at the state Department of Budget and Management’s website, http://dbm.maryland.gov (under “What’s New”).

Serafini, who has focused on pension issues in Annapolis, held a similar forum in July 2010 at a packed Kepler Theater at Hagerstown Community College.