Fairfax County officials will study dramatically altering retirement plans for new county employees, a move that would put workers’ retirement income into a 401(k) system instead of a guaranteed pension.
The shift was suggested Tuesday by Republican Supervisors Pat Herrity and John Cook as the county looks to offset investments that have tanked — forcing county officials to reach into empty coffers to cover retirement benefits.
In essence, the potential change would set what employers and employees contribute to the retirement system rather than guarantee payouts.
The county is expected to dole out $26.5 million more in retirement payments next budget year, a roughly 5 percent increase from this year.
“A dip in the stock market can cause an immediate and unexpected need for an employer — in our case the government — to increase their contribution to the retirement fund,” Herrity said. “We all know there are only two ways to pay for [retirement funding shortages]: cut something else in the budget or raise taxes.”
Allowing easier forecasting for retirement payments, defined-contribution plans such as 401(k)s have become more popular with employers and governments in recent years. Montgomery County employs such a system.
The plan faces an uphill battle, though, with some Democratic leaders and officials with the county’s government employee union already balking at the proposal.
“Sometimes saving money is even worse than spending money if it comes at the expense of your employees,” said Supervisor Penelope Gross, D-Mason, who called the proposal a “complete surprise.”
Karen Conchar, president of the Fairfax County Government Employees Union, said such a plan would be a disaster for a county work force already facing layoffs and pay freezes.
“We’re not making the salaries we would be making in comparable private positions,” she said. “You’d end up with a less motivated staff if you went to a defined-contribution-type plan. It would not be good.”
Supporters of the plan say pensions don’t carry the same attraction they once did for job seekers, prone to change positions with greater frequency and unable to reap rewards reserved for staying many years with one employer.
Any changes would not go into effect next budget year. County employees are eligible for retirement benefits at age 65 with five years of service or when age and service combined equal 80 years. Police and other uniformed positions have less stringent eligibility requirements.
