STAFF REPORT
Operations Committee, November 5, 2009

Revision to Policy Statement 149, Law Enforcement Separation Allowance Benefits (HR10-01)
Consideration of revising Policy Statement 149, Law Enforcement Separation Allowance Benefits in response to recent legislation that clarifies the law regarding the special separation allowance provided to law enforcement officers under the local government employee’s retirement system
Speaker:  Mr. Dale Johnson

From:  Valiria Willis, Director of Human Resources
Prepared by:  Dale Johnson, Employee Benefits Manager
Approved by:  Benjamin T. Shivar, Town Manager
Approved by:  Michael J. Bajorek, Assistant Town Manager

Executive Summary:  In July, 2009, the NC House and Senate approved legislation that provided clarification and direction to local governments regarding payment of a special separation allowance provided to law enforcement officers who retire from the Local government Employee’s Retirement System, hereafter referred to as LGERS.  Staff has reviewed this legislation and revised Policy Statement 149 for council consideration.

Background:  Since 1987, all government entities in North Carolina have been required to pay a separation allowance (in addition to all other retirement benefits) to all qualified law enforcement officers upon their retirement.  This law was created for the purpose of providing supplemental income and a “bridge” from full-time employment to Social Security eligibility and/or access to other retirement income.  It was presented to the legislature as meeting the needs of law enforcement officers who have reached retirement eligibility the opportunity to leave the daily stress associated with this type of work and still be financially secure.

Pursuant to GS 143-166.42, the governing body for each unit of local government is responsible for making determinations of eligibility for continued payment of the separation allowance if the retired officer becomes employed while receiving the separation allowance.   When the legislation was first enacted, the statute addressed only law enforcement officers working for the State and their eligibility for the separation allowance.  When it was realized that local law enforcement officers would also be eligible, a technical correction was added effective January 1, 1987 that gave the local governing body the authority to determine eligibility for payment of the separation allowance.

Discussion:  In earlier years, there was limited guidance with regard to determining eligibility for continued payment of the separation allowance if the retired officer became employed during the time they were receiving the separation allowance.  Town of Cary Policy 149 was created to establish clear guidelines for the organization to determine continued eligibility.

Policy 149 currently states that the payment of the separation allowance ceases if the retired officer is “reemployed in any position at the Town of Cary, except in the interest of public safety where the retiree is working in a contract or temporary reserve officer basis or related capacity and the position does not require participation in the N.C. retirement system.”  The legislation enacted in July 2009 requires that our policy be revised to state that the payment of the separation allowance ceases as of “the first day of reemployment by a local government employer in any capacity,” except “if the retired officer is reemployed by a local government employer in a public safety position in a capacity not requiring participation in the LGERS.”

Policy 149 also currently states that the payment of the separation allowance ceases if the retired officer is “employed at any N.C. governmental organization in a position which requires the retiree to participate in the N.C. retirement system.”  This expressly prohibits the retired officer from working in a position that requires participation in any of the N.C. retirement system funds of which there are three others beside local government.  The new legislation allows the retired officer the opportunity to work in a position that requires participation in any of the other funds besides local government, and continue to be eligible to receive the separation allowance.

Fiscal Impact:  With the modification to this policy, the cost of this benefit to the Town will not change.  The added flexibility of the revised Policy #149 gives the retired officer more reemployment options, but further limits the criteria for which the Town could cease payment of the separation allowance.  The added limitations of the new criteria have the potential to increase the Town’s overall cost of paying separation allowances.  However, in the past five years no retired officer has chosen a reemployment option that would cease their separation allowance.  Currently, there are 13 retired officers receiving separation allowances.  Based on the current police officers working for the Town of Cary there are 3 officers that are eligible to retire by the end of FY 2013.  During this same period, 5 retired officers will no longer qualify for the separation allowance based on age, resulting in a net of 11 retired officers receiving separation allowance at the end of FY 2013.  On average, the separation allowance increases the retired officer’s annual retirement benefit by 45% until they reach age 62.

Staff Recommendation:  Adopt revised Policy Statement 149.