The state House Finance Committee held a public hearing in Pittsburgh yesterday on a proposal by the Allegheny County Retirement Board to stop including overtime pay as a part of the calculation for pension benefits for new employees.
Allegheny County Treasurer John Weinstein and county Controller Mark Patrick Flaherty told the committee that overtime payments need to be eliminated from pension calculations because they create inequity in the county's pension fund and they could jeopardize its solvency.
But union representatives of county employees at the jail, county police, sheriff's office and workers who staff the court system countered that eliminating overtime pay from pension benefit calculations simply penalizes dedicated county workers.
"Actuaries have always recommended that we curb the cost of overtime calculations to the pension fund," said Mr. Weinstein, who is also the president of the county's retirement board.
Under the current formula, county officials said, employees who pile up excessive amounts of overtime in their last two years before retirement significantly increase their pension benefits, yet other county employees who don't qualify for overtime end up with a much lower pension.
The county retirement board devised a plan to level out the benefits by removing overtime pay in pension calculations and changing the calculation of an employee's pension by extending the period in which the final average salary is based from two years to four years.
That will balance out the pension benefits for all county employees, Mr. Flaherty said. It will also decrease the unexpected and inordinately large retirement benefits that will be paid over a lifetime, he said.
"This is for the taxpayers. We are looking for cost savings any way we can get them and this will do it," said Mr. Flaherty. He added that he first noticed a spike in retirement benefit payments in the pension fund shortly after the terrorist attacks on Sept. 11, 2001, when officers who retired from the county police were receiving balloon pension payments because of overtime calculations.
"We took steps to address that at the time and we ended up cutting overtime by county police at Pittsburgh International Airport by 30 percent, but that wasn't enough. There are all kinds of loopholes in the union contracts that lead to these huge overtime costs," he said.
Sponsored by state Rep. Matt Smith, D-Mt. Lebanon, the proposal under consideration by the House Finance Committee would change the county code if approved, but will not apply to current employees. In fact, the earliest it could apply to any employee is eight years because that is how long it takes for a county employee to get vested in the pension plan.
Meanwhile, Mr. Flaherty and Mr. Weinstein said county employees who earn a lot of overtime pay will be able to contribute as much of their overtime earnings as they want into a 457 plan -- a deferred compensation plan for municipal employees that operates like a 401(k) plan.
But Mike Ducker, of the Allegheny County Prison Employees Independent Union, told the committee that even though the change wouldn't affect current employees, it would essentially create a two-tier system where all county employees were not treated equally for the work they perform.
The retirement board ought to consider adding union representatives in its ranks, he added, because at the moment: "there are no active, blue-collar union employees on the board."
"This proposal affects the working man's ability to contribute to a health pension for themselves," said Tom Halaburka, of the union that represents deputy sheriffs.
Both Stephen Waugaman of the union that represents workers in the courts system and Chris Swanson of the county police said it is unfair for the county to penalize its employees for taking overtime when the county is severely understaffed.
"The retirement board here is essentially asking the Legislature to solve for them what is a management issue," said Mr. Waugaman.
State Rep. David Levdansky, D-Forward, chairman of the House Finance Committee, said the committee will continue working on the proposal in the next few weeks.
Karamagi Rujumba can be reached at firstname.lastname@example.org or 412-263-1719.