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Posted on Sat. Aug. 16, 2014 - 12:01 am EDT

Employee retirement change could save county government millions

Commissioner proposes replacement for PERF

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A proposed change in employee retirement benefits could save Allen County government almost $13.4 million over 10 years.

Expressing dissatisfaction with the management of Indiana's Public Employee Retirement Fund (PERF), which currently oversees the pensions of the county's 1,300 non-public safety workers, Commissioner Nelson Peters Friday proposed creation of an in-house retirement account for new employees.

"We've become a donor county (for PERF)," Peters said, noting that the county is paying about 11.2 percent of employees' salaries into the fund (including 3 percent from employees), but employees are getting a return of about 6 or 7 percent. Peters said the difference helps compensates for counties who have not been paying into the fund, but County Auditor Tera Klutz said that problem was addressed earlier this year so that governments face a fine for failure to pay.

In place of PERF, which is traditional pension offering a specific payout, Peters said the proposed replacement could see the county create a program similar to a 401(k) in which it would match employee contributions up to 5 percent of their salary. The county recovers its contribution to PERF if the employee does not stay the 10 years needed to become vested.

Currently, the county pays about $24.17 million into PERF over 10 years, which would shrink to about $10.8 at a 5 percent match.

Employees currently enrolled in PERF would not be affected, but nearly 9 percent of the county's work force turns over every year, Peters said. The new employees' retirement benefits should be about the same as what will be offered under PERF, Peters said.

As The News-Sentinel reported in June, PERF officials themselves have expressed concern that the program has been paying a higher rate to retirees than its investments were earning. This year the program made adjustments designed to correct the imbalance, which is why an unusually large number of public employees are retiring this year before the changes take effect.

Peters said he will ask county attorneys to draft a proposal for consideration as soon as next month. If the three-member Board of Commissioners agree, the change could take effect Jan. 1

About 160,000 state and local employees are covered by PERF, and Peters acknowledged the program could be affected if other governments follow Allen County's lead.

Klutz, however, noted that the full impact would be years away. "We want to give our employees an incentive to save (for retirement)," she said. "This is a great way to deal with shrinking revenue."

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