Last week the Mobile County Commission agreed to spend $412,000 to extend a one-time bonus to its retirees, but so far it’s unclear whether other civic employers — including the area’s largest — will follow suit.
The authorization for the one-time payments came from a law state legislators passed earlier this year. Act 2017-267 applies to employees who retired from a Retirement Systems of Alabama (RSA) agency and paid into the Employees’ Retirement System (ERS).
Per Act 2017-267, if approved by their former employer eligible retirees would receive $2 for every month of their civic service or $300, whichever is greater. The same law also extends a one-time payment of $300 to beneficiaries of deceased retirees.
According to William F. Kelley, director of ERS benefits, one-time payments have been periodically approved by the Legislature over the past few years as permanent cost-of-living adjustments became less sustainable due to their recurring cost to local agencies.
“The Legislature has not granted a cost-of-living increase in quite some time because it is expensive. It adds immediate liability to our retirement system, which makes us look more underfunded than we are,” Kelley said. “If all of the state [and education] retirees got even a 2 percent cost of living increase, the immediate liability for RSA would be more than $1 billion.”
In contrast, the one-time payouts legislators approved in recent years do not create any unfunded liability and for retirees. They have the same financial impact as a one-time bonus for an active city or county employee.
The more than 900 contributing agencies which pay into RSA can either pay the cost of those bonuses in one lump sum or through a temporary increase in the monthly contribution they make to the ERS on behalf of their retirees.
For the Mobile County Commission, which has roughly 807 retirees including some veterans of the Mobile County Sheriff’s Office, the options in 2017 were to tack on an additional .75 percent to its ERS contribution rate from October 2018 through September 2019 or pay $418,214 in an upfront payment.
When the issue was brought before the commission, Commissioner Jerry Carl asked if the state was contributing money to it. After Carl was told the state would not, commissioners agreed to pay the lump sum in a unanimous vote July 10.
However, because the authorizing legislation makes each agency’s participation optional, the payouts don’t have to be given at all, which Kelley said many agencies have opted to do.
That’s what the city of Mobile did in 2014 despite pressure from advocacy groups such as the Alabama Retired State Employees Association (ARSEA), which pushed this year’s bill as well.
“Some of our leaders think we had the votes on the [Mobile] City Council [in 2014], but we just couldn’t get Mayor [Sandy] Stimpson to include it on the agenda,” ARSEA Executive Director Liane Kelly told Lagniappe this week. “That’s something we’re working on this year. We certainly hope it can at least come before the mayor and the council.”
Kelly said ARSEA is planning to send representatives to address the City Council within the next two weeks, which is a common practice as agencies around the state consider whether to fund the one-time payment for their respective retirees.
In Mobile, the matter is also slightly more complicated because the city maintains a separate, non-RSA pension plan for retired public safety employees. That means even if the one-time bonuses from Act 2017-267 were approved, it wouldn’t have an effect on the largest groups of city retirees under the Mobile Pension Board.
In June, all RSA agencies received a letter outlining their options under Act 2017-267 and so far the County Commission is the only local agency to take any action.
On Tuesday, Mobile City Councilwoman Bess Rich confirmed the city had received a breakdown of its options from RSA, though because of the city’s rules, putting it on the agenda for consideration will be left up Stimpson. According to Rich, money to make payments to retirees would have to be budgeted and only the mayor’s office can propose a budget amendment.
The Mobile County Communications District has also discussed it but tabled a decision to get more information. However, as a younger agency, MCCD only listed four retirees in 2014, and its total payout this year, if approved by the board, would only cost the agency $2,700.
In the city of Mobile, it’s unclear how officials may proceed. On Tuesday, a representative from Stimpson’s office only commented to say, “The administration has not come to a decision.”
Officials have until October to respond to RSA, but in the meantime, eligible county retirees can expect a one-time payment in December. For those facing increased living expenses and rising healthcare costs, Kelly said, the bonus can go a long way.
“For years, retirees have continued to face increases just in their cost of living, and these bonuses are fairly small — the average is around $600,” Kelly said. “This is the best way for a city, county or public board to show retirees, who were public servants, that they do care about their employees’ quality of life once they retiree. I think it sends a great message.”