Montgomery County Public Schools spent more on its pension program last year as teachers, principals and staff retired later to bring in more income. Fewer than one of four school employees retired when they became eligible for full pensions. Just 25 percent of 65-year-old employees chose to end their tenures, and once they passed that retirement benchmark, they became more likely to plug away into their 70s: 82 percent of school employees ages 66 to 67 kept working, along with 85 percent of those between 68 and 69.
“When we move into the 60s, [retirement] rates are lower than we saw before,” said Douglas Rowe, who headed the audit for consultant group Mercer.
Even though there were about 80 fewer active members of the pension program, the average age of active employees increased from 45.9 to 46.1, with the annual benefit service bumping up from 10.3 years to 10.7 years.
“The group got a little older, which makes the plan a little more expensive as a percentage of pay,” Rowe said.
Martha Bobbino, director of library services for the Employee Benefit Research Institute, said that workers across all fields are expecting to retire later than in the past: “It’s really a combination of the poor economy, inadequate finances, and the need to make up for losses in the stock market.”
The school system’s contribution rose from 4.67 percent in the 2008-2009 school year to 5.57 percent of payroll. Of seven factors, “aging” and “increased experience” accounted for 57 percent of the jump.
Benefits cost just shy of $2 million for the cash-strapped school system, compared with last year’s $1.8 million.
Montgomery’s budget has been cut $97 million in the past two years, landing at $2.1 billion.
The pension plan assumes an annual investment return of 7.5 percent, which school board member Christopher Barclay, chairman of the fiscal management committee, worried was unrealistically high “because we haven’t seen particular success with it.”
Rowe told the committee that figure reflected a long-term assumption, and that “if we were talking about what you could reasonably expect over the next two or three years,” the assumed return would be lower.
“There’s a roughly 50-50 chance you’re going to get either more than or get less than that, and if there were lots of money you might choose to have a greater than 50 percent chance of reaching the expected rate of return — but that doesn’t seem to be the case.”
