The Mobile County Commission has voted to spend roughly $412,000 to provide one-time bonus payments to its retirees, while the city of Mobile and at least one other local agency continue to weigh whether to extend similar payouts to their own former employees.
Commissioners approved the lump-sum payment in a unanimous vote on July 10, opting to pay the cost upfront rather than spread it out through a temporary increase in the county’s monthly retirement contributions. County officials had faced a choice between paying $418,214 in one payment or adding an extra 0.75 percent to the county’s contribution rate to the Employees’ Retirement System from October 2018 through September 2019. Before casting his vote, Commissioner Jerry Carl asked whether the state would help cover the cost and was told it would not, but commissioners moved ahead with the bonus anyway.
The payments are authorized under a new state law, Act 2017-267, passed by Alabama legislators earlier this year. The act applies to retirees of agencies that participate in the Retirement Systems of Alabama and pay into the Employees’ Retirement System. Under the law, eligible retirees would receive $2 for every month they worked for their former agency or $300, whichever amount is greater. Beneficiaries of retirees who have since died are also eligible for a flat one-time payment of $300.
For Mobile County, which has about 807 retirees, including a number of former Mobile County Sheriff’s Office employees, the vote means eligible retirees can expect to see their one-time payments arrive in December.
William F. Kelley, director of benefits for the Retirement Systems of Alabama, said one-time bonus payments like these have become the Legislature’s preferred way to help retirees in recent years as permanent cost-of-living increases have grown harder to justify financially. Because a cost-of-living adjustment permanently raises what the retirement system owes retirees for the rest of their lives, even a small increase can add enormous long-term liability across the system.
“The Legislature has not granted a cost-of-living increase in quite some time because it is expensive. It adds immediate liability to our retirement system, which makes us look more underfunded than we are,” Kelley said. “If all of the state and education retirees got even a 2 percent cost of living increase, the immediate liability for RSA would be more than $1 billion.”
A one-time bonus, by contrast, does not create any new unfunded liability for the retirement system. Financially, it functions much like a one-time bonus paid to a current city or county employee rather than a permanent raise.
More than 900 agencies statewide contribute to the Retirement Systems of Alabama on behalf of their employees, and each has the option, but not the obligation, to fund the one-time bonus for its own retirees. Agencies that choose to participate can either pay the full cost in a single lump sum or spread it out by temporarily raising their monthly contribution rate. Kelley said many agencies around the state have chosen not to participate at all, since the law makes participation optional.
That was the case for the city of Mobile in 2014, when a similar one-time bonus program was offered to RSA-participating agencies. The Alabama Retired State Employees Association, an advocacy group that also pushed for this year’s legislation, had lobbied the city to take part but said the effort stalled before it ever reached the City Council floor.
“Some of our leaders think we had the votes on the City Council in 2014, but we just couldn’t get Mayor Stimpson to include it on the agenda,” said Liane Kelly, executive director of the Alabama Retired State Employees Association. “That’s something we’re working on this year. We certainly hope it can at least come before the mayor and the council.”
Kelly said her organization plans to send representatives to address the Mobile City Council within the next two weeks, a step the group has taken in communities across the state as local governments and agencies decide whether to fund the payments for their retirees.
In Mobile’s case, the decision is complicated by the fact that the city maintains a separate pension plan for retired police officers and firefighters that is not part of the Retirement Systems of Alabama. That means even if the city agrees to fund the one-time bonus under Act 2017-267, it would have no effect on the city’s largest group of retirees, those covered by the Mobile Pension Board.
Mobile City Councilwoman Bess Rich confirmed this week that the city has received a breakdown of its options from the Retirement Systems of Alabama. However, because of how city rules are structured, only Mayor Sandy Stimpson’s office can place the matter on the council agenda, since funding the bonus would require a budget amendment that only the mayor can propose. A representative from Stimpson’s office said only that “the administration has not come to a decision.”
The Mobile County Communications District has also discussed participating but tabled the decision to gather more information. As a relatively young agency, MCCD listed only four retirees in 2014, and its total cost to fund the bonus this year, if approved by its board, would be about $2,700.
All RSA-participating agencies received a letter in June outlining their options under the new law, and local officials have until October to notify the retirement system of their decisions. So far, the Mobile County Commission is the only local government in the area to have taken formal action.
For retirees who do receive the bonus, the payments tend to be modest but still meaningful, Kelly said.
“For years, retirees have continued to face increases just in their cost of living, and these bonuses are fairly small — the average is around $600,” Kelly said. “This is the best way for a city, county or public board to show retirees, who were public servants, that they do care about their employees’ quality of life once they retire. I think it sends a great message.”