Allan and Cindy Owen don’t fill some of their arthritis prescriptions because of the cost. In recent years, the septuagenarian couple started buying more canned foods so they don’t have to grocery shop every week. They haven’t traveled far from Lilburn since their children paid for a trip five years ago as a golden anniversary gift.
Allan retired in 2014 as director of technical services for the Gwinnett County Clerk of Court’s office. His county pension plan provides a 1% cost of living increase every year. The inflation rate since his retirement has climbed 26%, according to the U.S. Bureau of Labor Statistics.
As inflation soars, the Owens are likely in a better situation than the average county government pensioner in Georgia. Of the 106 defined benefit pension plans administered by ACCG, which represents the governments of Georgia’s 159 counties, only seven built in cost of living increases and two others gave one-time increases in the past four years, Retirement Services Director Kale Hodges said.
“It is expensive,” Hodges said. “You don’t know how long the person is going to live and it’s a compounding effect.”
Last year, after the Gwinnett County Commission cited inflation in approving 8-10% raises for employees, Owen emailed commissioners asking for higher cost of living increases for retirees. He was told that would not be possible.
“Most of us worked hard all of our lives to get where we are,” Owen said. “It seems that retirees have kind of been forgotten in this whole thing.”
His pension is about $1,700 per month after deductions for insurance. A Vietnam veteran, he also receives social security and had retirement savings from his time in the private sector.
Gwinnett County administers its own pension plans, which closed in 2007 to new employees. Since then, the county has exclusively offered defined contribution retirement benefits similar to 401(k) plans. As of last fall, Gwinnett was still paying pensions to more than 2,700 retirees, with an additional 780 enrolled in the plans who were still working and more than 730 scheduled to begin receiving pensions after they meet age requirements.
Credit: Jason Getz / Jason.Getz@ajc.com
Credit: Jason Getz / Jason.Getz@ajc.com
Gwinnett has retirees and employees in five different pension plans. Three do not offer any cost of living increases, while the other two increase 1% annually. Payments depend on the retiree’s average salary and years of service. Retirees are also eligible for social security.
Neighboring DeKalb County gave its retirees 2% cost of living adjustments in 2019, 2020 and last year, “based on organizational priorities and budget,” spokesman Quinn Hudson said.
Gwinnett couldn’t provide higher cost of living increases without changing the entire funding formula for the pension plans, which were amended in 2004, spokesman Joe Sorenson said. As of last year, the county’s pension obligation was 81.5% funded.
“If this 1% fixed rate had not been chosen and another method had been used, it would have also affected the amount of the employees’ contributions to the plan as well as the benefits to be paid to retirees,” he said in an email.
The county also said raising the cost of living adjustment for retirement plans that were established with fixed increases would be violate the gratuities clause of the state constitution, which forbids officials from giving public funds away without an equal return.
The gratuities clause is intended to fight corruption. Kale said he hadn’t heard of it being applied to cost of living adjustments.
Legal confusion has persisted for decades over the gratuities clause and pensions, said Tim Boughey, an employment lawyer with the Atlanta-based firm Jackson Lewis whose current clients do not include Gwinnett. The validity of Gwinnett’s argument depends on the language in the plan and how federal tax code is interpreted, he said.
“There’s certainly an argument to be made that that is a gratuity because it’s giving someone something extra that they didn’t bargain for at the time,” Boughey said.
