For some Fairfax public employees, retirement means collecting a nest egg — and returning to work
By Fredrick Kunkle,
Dozens of Fairfax County employees retire each year. But not really. After collecting a tidy nest egg to supplement their pensions, many return to the county payroll.
Critics say the revolving door, though legal, is a symptom of government compensation and retirement plans that have become too burdensome for taxpayers to support.
But county officials say the arrangement has helped Virginia’s largest jurisdiction manage a workforce of more than 12,000 full-time employees, and perhaps save money, too. It’s also been profitable for scores of employees like Douglas M. Guzman.
Guzman, 58, spent three decades working for Fairfax County government as a civil engineer. His expertise allowed him to manage the installation of synthetic fields in county parks.
In 2005, when Guzman became eligible to retire at 52 after 28 years of service, he opted instead to enter the county’s Deferred Retirement Option Program, known as DROP.
Under DROP, Guzman continued working and collecting his annual salary of $95,184. The money he would have received in retirement benefits went instead toward an interest-bearing DROP account that earned a guaranteed 5 percent a year.
At the end of three years, Guzman collected his $250,000 lump sum. He then left his full-time position in the Fairfax County Park Authority, as DROP requires.
But like nearly 100 others, Guzman came back to work for the county. He cannot earn additional service credits toward his retirement, but he collects about $48,542 a year as a part-time employee, qualifies for limited health-care benefits and cashes retirement checks from the pension benefits earned previously during his career.
“It’s the best thing since sliced bread,” said Guzman, a Herndon resident.
Documents obtained by The Washington Post through the Virginia Freedom of Information Act show that 95 people, including Guzman, returned to the county payroll for at least part of last year or longer after participating in DROP. Several are eligible to earn more than $100,000 a year.
Some county officials say the retirees’ return and DROP itself have benefited taxpayers and county workers alike. Others are not so sure and wonder whether DROP is part of a pension system that has grown too generous, especially in an economy that has been slowly recovering from a deep recession.
“That, I really find objectionable. They should not be able to collect a pension while working for the county,” said Frederick A. Costello, a member of the Fairfax County Federation of Citizens Associations who has studied county budget issues.
DROPs have also created controversies in places such as Philadelphia. Last year, three states enacted legislation restricting DROPs, according to a report last month from the National Conference of State Legislatures.
Among those who went through Fairfax County’s DROP and returned are Edward L. Long Jr., a former deputy county executive who now oversees the transition to FOCUS, a new computerized procurement system ; Barbara A. Byron, a former assistant planning director who returned as director of the Office of Community Revitalization and Reinvestment; David M. McKernan, a former deputy fire chief who is now emergency management coordinator; and James P. Zook, a former director of planning and zoning who returned as an administrative aide to assist a redevelopment project in Tysons Corner.
Other retirees who went into DROP and returned to the county payroll include IT specialists, a landscape architect, a day-care center teacher, a welder, 22 police officers, four sheriffs deputies and six firefighters.
Long retired in May at 58 after nearly 35 years of service with a salary of more than $195,040. He returned the next month as FOCUS project executive sponsor, earning between $95,472 and $143,208 a year. He is eligible for limited health-care benefits. Long, 59, of Centreville, did not return calls left at his home and office seeking comment.
Byron retired July 17, 2009, at 59 after nearly 23 years of service at a salary of $146,199. After returning a month later as director of the Office of Community Revitalization and Reinvestment, she became eligible to earn $149,123 for a 40-hour week and up to a maximum $198,941 including pension payments. She is also eligible for full benefits. Byron, 61, declined to comment for this article.
Zook stepped down in October 2010 at 61 after 24 years of service with a final salary of $168,075. He returned in November 2010, earning between $85,718 and $128,578 with eligibility to receive some benefits. Zook, 63, of Clifton, did not return a call seeking comment.
McKernan retired as deputy fire chief in February 2009 at 54 after more than 20 years of service while making $106,701. McKernan, now 57, returned in October 2009 as a full-time appointee eligible to earn $134,640 for 40 hours a week and up to a maximum of $198,941 a year with pension payments.
McKernan, who lives in Burke, said in an interview that he saw an obvious advantage in accumulating three years’ worth of retirement benefits as a lump sum. But he also saw DROP as a way to prepare for retirement and continue working for the county he loves.
“I see it as a win-win. The county would have had to pay that salary anyway,” McKernan said. “You’re getting a bargain. . . . The county’s invested a lot of money in me.”
The Board of Supervisors has launched a broad review of retirement benefits as many state and local governments find themselves struggling to fund current needs and the promises made to former employees. Maryland Gov. Martin O’Malley (D) wants to shift some state pension costs to counties; Virginia Gov. Robert F. McDonnell (R) has asked state workers to contribute more to their retirements.
In Fairfax, critics have argued that pension costs could become unsustainable.
“People are working longer and putting off retirement, and I think our retirement plan really needs to be adjusted to reflect that,” Supervisor Pat S. Herrity (R-Springfield) said.
But others said the county’s salaries and pensions retain excellent people at a reasonable cost.
“Fairfax County does not have an overly generous system,” said Board of Supervisors Chairman Sharon Bulova (D). She said that although she would like more precision and clarity on DROP’s financial impact, previous analyses suggest that its benefits outweigh its costs.
The debate over retirement benefits became heated in the fall when Republicans attacked Sheriff Stan G. Barry (D) for seeking to collect a $1 million lump sum in DROP and then running for reelection. Barry, who won, said that foes exaggerated the size of his lump sum, that his participation in DROP had been vetted by the county attorney and that his return would save taxpayers money.
Last month, a long-awaited study of the county’s retirement benefits suggested that the retirement age should be raised to 55, from 50. The study, by AON Hewitt, did not take a close look at DROP except to say that its incentives clash with others that reward early retirement. The study also noted that Fairfax County is one of only two jurisdictions in the region that offer DROP to workers who are not public safety personnel.
Fairfax has used DROP for nearly a decade to give employees more flexibility managing their benefits and administrators a better idea of employees’ exact retirement plans. DROP also allows employers to retain highly skilled employees while preparing for succession. That’s particularly useful in public safety, where training is intensive.
As of January, 705 county employees have entered DROP. Robert L. Mears, executive director of the county’s Retirement Administration Agency, said the county’s DROP accounts accrue about $200,000 to $215,000 a month.
Costello argues that DROP provides little advantage for its cost.
“It costs the county money because they’re guaranteeing the 5 percent. It also costs the county because they’re retaining high-priced people instead of replacing them with low-priced people,” Costello said. He also found its main rationale dubious, because he said the county could simply begin grooming replacements earlier.
Fairfax County officials say DROP’s net cost to the county’s operating budget and retirement system are difficult to calculate but appear negligible.
When employees enter DROP, for example, the county’s payroll contributions cease. The county can also delay hiring a new person — or even rehire the same employee later, generally at a lower salary and with fewer benefits but with the same experience.
“From my perspective as a HR director, I don’t think there’s harm in it because you’re getting a highly skilled, known quantity,” said Susan E. Woodruff, director of the county’s Human Resources Department. “Could someone take advantage of it? I’m sure they could. But from my perspective it serves a very valuable purpose. I think for the most part, you see savings.”
DROP’s impact on the retirement system is harder to gauge, however, because any assessment depends on a hypothetical. If an employee would have retired at the same time and under the same circumstances regardless of DROP, then the retirement system would not bear any additional cost.
However, if an employee would have continued working and retired later anyway, the retirement system would likely pay more benefits than it would have otherwise, particularly because the county pays a supplement to people who are not yet eligible to receive full Social Security benefits.
Mears also said that because the employee’s retirement benefits are not paid out, but are credited instead to the employee’s DROP account, the county’s pension funds continue to profit from their investment. In recent years, returns on investment in the systems’ portfolios have far outpaced the guaranteed payout of 5 percent interest on the lump-sum accounts, Mears said.
Guzman, the Parks Authority engineer, said he thinks on balance that DROP has been a boon for him and the county. Without DROP, he might never have been able to save such a lump sum. Yet, the county can continue to benefit from his expertise and put off hiring someone else while he receives a reduced salary with limited benefits and no additional service credit toward retirement.
“If you can go through DROP, and get what I have, it’s a pretty good deal,” Guzman said. “But at the same time, I think the county gets a good bang for its buck too.”