LA PLATA, Md. — Charles County officials are considering changes to the county’s pension plan to address financial liabilities tied to former employees who left before becoming fully vested. Currently, these accounts continue to earn interest, increasing long-term costs for the county.
The Charles County Pension Plan Committee (CCPP) met on Feb. 6, 2025, to discuss options for handling non-vested terminated participants. Megan Donnick, HR deputy director, led the discussion, and the committee will make a recommendation to the county commissioners regarding forced distributions of inactive accounts.
What Does Non-Vested Mean?
Employees must work at least five years to become vested, meaning they qualify for employer contributions to their retirement.
If they leave before five years, they are considered non-vested and are only entitled to the money they personally contributed, plus interest.
Many former employees have left their funds in the county’s plan, causing financial strain.
Key Details
Who Is Affected?
- 258 former county employees who are only vested in their own contributions plus interest.
- Their account balances range from under $1,000 to more than $7,000.
Why Is This an Issue?
- These accounts continue earning 5% interest annually, increasing the county’s financial liability.
- The total plan liability for these accounts is currently $1.26 million and could grow over time.
What Changes Are Being Considered?
- Force out small accounts under $1,000:
- Employees would be required to take a distribution or roll the funds into another retirement account.
- Requires a plan amendment approved by county commissioners.
- Would eliminate liability for 65 accounts, saving up to $100,000.
- Allow rollovers for accounts between $1,000 and $7,000:
- Employees would have the option to take a payout or roll their funds into an IRA.
- If no response, funds would be automatically rolled into an IRA.
- Could reduce liability by up to $1.8 million.
- Adjust how the county estimates future costs:
- Instead of assuming former employees will withdraw funds immediately, adjust the projection to assume withdrawals at age 62.
- This change would eliminate yearly financial losses but increase overall liability to $3.4 million.
- Suspend interest growth on larger accounts ($7,000+):
- Future employees leaving county service would stop earning interest after a certain period.
What’s Next?
- The Pension Plan Committee will make a recommendation to the county commissioners on how to proceed with these changes.
- The county may conduct a one-time communication campaign to inform affected employees of their options.
- Officials are evaluating administrative costs before finalizing any amendments.
These proposed changes aim to reduce long-term pension liabilities while providing former employees with clearer options for their retirement savings.
The CCGTV video of the meeting is not available for viewing as of Feb. 19, 2025. See the Feb. 6, 2025, meeting agenda here.
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