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Our Town by William Kelly: Palm Beach increases workers’ retirement benefits

The town is boosting employee retirement benefits with the goal of improving the recruitment and retention of personnel.

The Town Council approved the changes on May 14. They will be implemented on June 1.

The upgrade follows a year-long market study and proposed changes by town staff that were presented to the Town Council in March. The council forwarded the package to the town’s Retirement Board of Trustees for review on March 22, then approved it as an ordinance at the May meeting.

It has been seven years since the town’s last review of its retirement benefits. During that period, there has been increased competition among other employers in the regional job market, according to Gillian Barth, the town’s director of people & culture.

Over the past five years, it has become increasingly difficult to fill key staff positions, including patrol officers, 911 telecommunications, accountants, planners, engineers, equipment operators and water resource technicians, Barth told the council.

“While the vacancies can be attributed to several factors, pay and benefits is one area that is regularly cited during candidate interviews …” Barth wrote in a memo to the council.

Voluntary employee turnover is costly because of replacement and training costs and reduced productivity, Barth wrote.

The changes to the retirement program are multifaceted.

They include increases to the “multipliers” that adjust (along with an employee’s years of service and average pay upon retirement) the size of the pension payment he or she will receive. The multiplier is increasing from 2.75 percent to 3.0 for police and firefighters, and from 1.70 percent to 2.0 percent for general employees and lifeguards.

The town is also shortening the length of time needed for employees to become vested in both its defined benefit (pension) and defined contribution (invested accounts) plans.

That vesting requirement, currently 10 years for all employees, will be reduced to as few as five or eight years for general employees and lifeguards, and to eight years for public safety personnel, in the defined pension plan.

In the defined contribution plan, the vesting period will be reduced from 10 years to one year, according to town documents.

In another change, general employees will be able to opt for a full defined contribution plan in lieu of the current hybrid model in which there is both a defined pension and defined contribution plan.

In another bid to boost its competitiveness, the town is revising its threshold for retirement eligibility to match the Florida Retirement System for public safety personnel. Under the change, police and fire-rescue personnel will be eligible to retire after 25 years of service or at age 55 if vested.

In another significant change, the town is increasing the maximum length of the DROP, or deferred retirement option, to eight years instead of five. Under the DROP plan, employees continue working after becoming eligible for retirement, but the town does not continue adding to their benefits calculation. Instead, it pays their benefits into an interest-bearing account until they have completed the DROP.

In addition to the retirement plan changes, all public safety pensionable salary scales and step plan administration were increased to the 85th percentile of the market, instead of the 75th percentile, in 2023, to increase the town’s competitiveness.

 

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