Recall the brouhaha concerning Montgomery County’s payment of pension contributions to county workers based on cost-of-living adjustments that the employees did not actually receive. The Washington Post story here recounts the controversy regarding payment of these so-called “phantom” pensions.
According to the Post, Montgomery Council Council member Phil Andrews said at the time: "It's bad practice to tie pensions to salaries that aren't provided, and this is the year to change it, before it gets established and when there's a very clear rationale because of the extremely difficult fiscal year," Andrews said. "The county needs the money." This proposition seems sensible enough –more than sensible enough, really – even if the county wasn’t facing such severe budgetary constraints.
I was reminded of the Montgomery County phantom pension controversy when I came across a page on the Maryland State Retirement and Pension System website which states: “The fiscal year 2010 Furlough and Temporary Salary Reduction Plan for State of Maryland employees does not impact retirement benefits. Furlough time is included in the calculation of earnable compensation and service credit. Similarly, the temporary salary reduction does not impact retirement benefits.”
I may be missing something. But this policy of calculating retirement benefits for state employees based not on the actual time worked or the actual salary earned, but rather based on time and salary as if the furloughs are not real, seems akin to Montgomery County’s policy of paying phantom pensions.
I understand that everyone, including state and county employees, wants to have the government contribute as much as possible to his or her pension. But in today’s very challenging fiscal environment, it simply may not make sense for the government to continue to pay pension benefits based on hours not worked or raises not received.
It seems like, when it comes to calculating retirement benefits for government employees, both the state and Montgomery County are haunted – quite deliberately so – by phantoms.
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