To: Board of County Commissioners
Through: Ben Colussy, Retirement Plan Administrator, Human Resources
Prepared By:
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Ben Colussy, Retirement Plan Administrator, Human Resources
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presenter
Presenter: Rich Harris, Chairman of Retirement Board; Dana Woolfrey, Gabriel Roeder Smith and Co., Plan Actuary; Cindy Birley, Davis Graham and Stubbs, LLC, Plan Attorney; and Ben Colussy, Retirement Plan Administrator, Human Resources
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Subject:
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3:00 PM *Vesting Requirement for the Defined Benefit Plan
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Purpose and Request:
recommended action
The Board is requested to provide feedback on the proposal to adjust the vesting requirement for the County’s retirement plan from an eight-year to a five-year requirement.
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Background and Discussion: Vesting under the existing Defined Benefit Plan currently requires an eight-year cliff vesting period. This means Arapahoe County employees are eligible to receive a monthly lifetime benefit once you reach the plan’s retirement age and have separated service. It is important to note that even after vesting, there is no guarantee you will receive the County contributions made into the plan. Adjusting the current eight-year cliff vesting period, which is longer than the typical five-year cliff vesting period among public retirement plans, would have two key financial implications:
1. Increase the plan liability by $20,000, and
2. Increase the Normal Cost of the plan by .01%.
Human Resources believes a change to plan vesting could positively impact the recruitment of entry-level to lower management positions (with approximate pay ranges of $40,000 to $80,000) and make the County more competitive with other counties and municipalities.
During the study session, the Plan Actuary will discuss the financial impact of changing the vesting period in more detail. The Plan Attorney can explain why previous Retirement Boards have not changed the vesting period. The Chairman of the Retirement Board and the Plan Administrator can answer any additional questions. If supported, the change in vesting will happen with the next plan amendment - likely effective January 1, 2026.
Fiscal Impact: Adjusting the plan vesting to a five-year cliff increases the plan liability by $20,000 and increases the normal cost of the plan by .01%.
Alternatives: There are alternatives to the proposed vesting change, which include the following:
Remove vesting altogether: A public retirement plan outlier. Significantly increases plan costs, and County training costs. Increases the likelihood of employee turnover and service credit purchase transactions to increase lifetime benefits. Also puts pressure on the Retirement Office to manage and maintain an exploding population of retirements payable years and sometimes decades in the future.
Implement a graded vesting schedule: Uncommon with public Defined Benefit Plans because there is no individual account balance, and it devalues the future lifetime benefit promised to short term employees. The goal of the plan is to provide lifetime benefits for a career of hard work.
Alignment with Strategic Plan:
☒Be fiscally sustainable
☐Provide essential and mandated service
☒Be community focused
Staff Recommendation: Support moving to a five-year vesting period because it makes benefits more attractive to new hires and provides lifetime benefits to more members at very little cost to the Plan/County.
Concurrence: Retirement Board, Plan Actuary, Plan Attorney, County Treasurer, and HR Director.