Consultants Outline Steps, Risks for La Plata's Proposed Supplemental Pension Plan

Frederica Daniels, an actuary with USI Consulting Group, told the La Plata Town Council that the town's plan-design phase must address benefit design, legal documentation and administration before any implementation.

"We've been asked by, La Plata to present to you some processes and challenges related to the pension plan," Daniels said, opening a presentation that the council requested after receiving a prior study of alternatives.

Why it matters: Council members have discussed a supplemental pension tied to the Maryland state plan (the study labeled "Plan 3") as a way to improve recruitment and retention for police and public works staff. If the town moves forward, USI said, the town would assume responsibilities that the state currently manages and would face costs and timing tradeoffs the council should weigh carefully.

USI's presentation focused on three overlapping workstreams the town must plan for: plan design (how benefits will be calculated and what the plan will promise), documentation and legal compliance (plan documents, trust and custodial arrangements, possible IRS review), and administration (actuarial valuations, GASB reporting, administrative and HR operations). "It's doable. Devil's in the details," Richard Sich, USI actuary, told the council when asked about integrating a town plan with the state plan.

USI highlighted several specific complications for an offset plan that supplements the Maryland state benefit. Because the town would not control the state plan, changes made at the state level could raise or lower the town's costs. USI said the town would need to define, in its plan document, rules for common but administratively tricky situations: employees who leave and later return, transfers between covered and noncovered departments, death and disability benefit integration, and the exact mechanics for calculating an offset when a participant departs.

The consultants also discussed procedural protections. USI recommended the town consider filing an IRS determination letter for a new plan to reduce the risk of later qualification disputes. The consultants noted that the town will need an actuary, a pension attorney, an investment adviser and auditors for ongoing GASB work, and that the HR system must be able to track eligibility, service dates and pay history to produce accurate benefit calculations.

On timing and cost, Daniels told the council the work will take time: "you're probably looking at a good somewhere between 6 to 9 months, maybe even 9 to 12 months, depending on the idiosyncrasies of the plan that you decide upon to actually get this in place." The consultants said startup costs (legal and setup), then recurring actuarial, audit and investment-management fees, and the annual contribution requirement must all be budgeted.

Council members asked several operational questions. Councilman David Jenkins asked for examples and best practices for police benefits; USI recommended focusing on the accrued benefit as an offset because that approach simplifies administration. Councilman Matthew Trollinger asked whether USI had reviewed the Bolton study's "Plan 3;" USI confirmed it had and said its presentation applied to that option.

On employee cost-sharing, USI said municipalities vary. USI noted the state plan participants currently contribute roughly 7% of pay; the consultants also said that the Plan 3 concept the council previously reviewed did not include an employee contribution.

Next steps: USI suggested the council consider a statement of work for more detailed cost modeling that would require personnel and payroll data and a clear list of the benefit provisions the town wants to promise. Director Kennedy was identified as the council's contact for further engagement.

The presentation concluded with USI offering to support a formal engagement if the council wishes to move from concept to detailed costing and documentation.