An increasing number of state workers are electing to retire before changes are made to the state’s pension system.
Take Win Hughey, 56. In 1984, Hughey left behind the life of a women’s shoe salesman to manage a warehouse for the state’s prison system.
He says he did it because, as a state worker, he could keep his unused sick and vacation days to add an extra 7 percent to his retirement benefits. But beginning July 1, the rules for the state retirement system are expected to change.
The S.C. House already has passed a bill that would prevent Hughey from using his unused days to increase his pension. The Senate will begin discussing that proposal next week.
But Hughey is not going to wait around to find out what happens. Instead, he will retire June 30.
“I’m 56. I planned to work until I was 62,” he said. “(But) there is no incentive for me to work.”
Hughey is one of the unintended consequences of retirement reform.
Lawmakers are changing the state’s pension system in an attempt to reduce its $13 billion deficit. But anything that prompts workers to retire earlier than they normally would have retired – such as ending some benefits – costs the state more money. That’s because there are fewer people paying into the retirement system and more being paid by the system.
So far, 5,603 workers covered by the pension system have filed applications to retire this year – or 819 more than at this time last year.
And more and more of those filing to retire are buying “service time” – or credit for additional years of work – so they can retire early. Since November, 3,912 people have filed applications to buy added years of service covered by the retirement system. That’s 1,035 more than during the same period a year earlier.
For more tenured state workers, buying service time will become far more expensive after July 1 if the proposed pension changes become law.
The state’s two largest retirement systems have more than 216,000 active members. Not all are eligible for retirement.
As of July 10, 2010 – the latest numbers available – the two systems had 19,774 people who were eligible or nearly eligible for retirement. An extra 819 people retiring this year represents 4 percent of that total deciding to retire.
(State law says you must have at least 28 years on the job – or be at least 65 years old with at least five years of service – to be eligible for full retirement benefits. Police officers and firefighters can retire with full benefits after 25 years of service or if they are at least 55 years old with at least five years of service.)
So far, the higher number of state workers opting to retire has not “put undue stress on the system,” said David Avant, managing legal counsel for the state retirement system.
But added retirements could have a big impact on some local governments, whose workers – along with many public school teachers – are covered by the state retirement system.
The prospect concerned Columbia city manager Steve Gantt so much that he had his staff calculate how many of the city’s roughly 2,000 employees were eligible to retire on June 30.
The answer: 230, including the city’s chief financial officer and some senior managers in the police and fire departments.
If all of those city workers choose to retire, it would cost the city $1.5 million to pay off unused and accrued sick and vacation days, Gantt said.
“I can’t imagine if all those folks decided to bail so they fell under the old criteria instead of the new criteria,” Gantt said. “It is what it is, and we’d have to do what we have to do.
“But I do have some concern about the financial implications.”
Under the House plan, state workers would get to keep the benefits they already have accrued under the current system. However, they would accumulate lower benefits going forward for any service beginning July 1.
Hughey said it is not worth it for him to stay. Instead, he plans to get another job in the private sector and use his retirement benefits as supplemental income.
“I won’t have as much time off with my family, won’t have the seniority,” he said. “I’ll have to work more. It’s OK, working doesn’t bother me.
“I just wish I had the (retirement) plan they said I could have.”
No rush in York, Chester, Lancaster
In York, Chester and Lancaster counties, school and government officials haven’t seen an increase in people applying for retirement in response to proposed changes in the state retirement system.
• Rock Hill budget director Steven Gibson said 64 city employees are eligible to retire. Eighteen of those people have decided to retire, but Gibson said most of their reasons don’t relate to the potential benefits change. That number is also about the same as last year’s retirement figures.
• York County human resources director Lisa Davison said more than 100 county employees are retirement-eligible. As of Wednesday, she was not aware of any new retirements that related to the pension issue.
• Chester County Supervisor Carlisle Roddey said none of the county’s more than 300 employees has rushed to retire because of any changes. On average, Chester County sees between one and five people retire each year.
• Lancaster County Administrator Steve Willis said some county employees had come with questions about the proposed changes, but none had decided to retire.
• Area school districts have not seen a significant increase in the number of employees filing for retirement, officials said. Of the 66 Clover school district employees eligible to retire this year, 12 have applied. That mirrors previous years, Human Resources Director Warren Barkley said.
• Beckye Partlow, Rock Hill schools’ human resources director, said things could change as employee contracts are finalized over the summer, but, “I have not seen an increase yet.”
— compiled by Shawn Cetrone and Nicole E. Smith
Flood of retirements ahead?
Lawmakers are considering cutting some of state workers’ retirement benefits to reduce the state’s $13 billion pension deficit. The changes would go into effect July 1, and many state workers who are eligible to retire may leave before then.
More planning to retire
More buying ‘service time’
SOURCE: S.C. Retirement Systems