In a move designed to save county tax dollars, the Clarke County Board of Supervisors has cut its ties with the Virginia Retirement System’s (VRS) administration of Line of Duty Act (LODA) funding for local hazardous duty employees. While the county’s exact cost savings associated with the change won’t be known until details of the VRS program solidify, Richmond’s fund management track-record leads county officials to believe that the cost avoidance benefits will be significant.
Clarke County’s move comes because of a recent legislative action by Virginia’s General Assembly that shifts the funding responsibility for compensating Virginia first responders killed in the line of duty from the Commonwealth to local governments.
“The Line of Duty Act program was developed by the General Assembly nearly forty years ago and until last year, when verbiage was added in the appropriations bill without discussion or debate, localities did not fund the program” said Clarke County administrator David Ash. “Until now the LODA was funded on an as-needed basis from the state general fund.”
Under LODA, all hazardous duty state and local government employees, including volunteers, are eligible for the hazardous duty benefits. LODA provides a $100,000 benefit for death occurring as a direct or proximate result of duties and a $25,000 for death by presumptive clause or within five years of retirement. The act also provides for lifetime health insurance coverage for a disabled employee, a surviving spouse as well as dependent children.
When the Commonwealth’s Line of Duty Act was established in 1995 benefit payments to hazardous duty employees and families were provided directly from the state treasury. But in 2011 the Commonwealth shifted LODA responsibility to employers. However, the 2011 Appropriations Act authorizing the LODA cost transfer also provides that local employers may opt out of state administration of the LODA fund.
The General Assembly change now makes Clarke County and other local governments fully responsible for self-funding all benefits relating to its past and present covered employees under the Line of Duty Act (LODA) from local tax funds.
By opting-out of the state administered LODA fund Clarke County expects to net a significant saving on coverage premiums. CLarke County will spend nearly $18K in 2011 with costs projected to continue to increase in the coming years. The supervisor’s Tuesday decision was a preemptive move based on expectations that the county’s LODA costs will continue to rise if left in the hands of VRS.
“The Clarke County Supervisors have decided that the cost of meeting the LODA benefits will be less to the County by opting out of the state administration of its funds” Ash said.
Clarke County is one of many localities across Virginia that has decided to step away from relying on VRS to manage its LODA fund according to Administrator Ash.
In addition to Clarke County employees, the county also provides LODA benefits to members of the Blue Ridge, Boyce, John H. Enders and Shenandoah Farms Volunteer Fire and Rescue Companies.
While few Virginians have argued against the providing line of duty benefits to hazardous duty employees and family members, many local leaders have criticized the General Assembly’s oversight of the LODA program which has steadily expanded in scope and coverage with little effort towards containing costs and management of benefits payments.
Local leaders were further angered when, as state taxation revenues fell, the General Assembly elected to shift its increasingly costly LODA program to Virginia localities. But unlike most unfunded mandates where management responsibility and associated costs are borne by the locality, the General Assembly opted to pass on only the costs of the LODA program while retaining control of the LODA funds at the state level.
So when the Virginia Retirement System was tasked with developing the funding and billing mechanism to support an already skyrocketing LODA program, the General Assembly’s short term solution was to “borrow” VRS funds to keep the LODA program solvent. To cover the “loan” the General Assembly mandated that the current 2011 year costs be repaid by the localities participating in the new program.
In a resolution passed on Tuesday Clarke Supervisors disputed that the 2011 Appropriations Act authorized or required localities to repay the borrowed funds.
By its own estimates, the VRS-administered LODA program costs for localities electing to remain in the state-administered program will be hefty. VRS estimates annual program costs will climb to $642 per full time employee and $160 for volunteer employees over the next few years. However, that VRS cost projection is based on a projection of 75,000 statewide participants, a total that could drop by as much as 50% as localities like Clarke elect to drop out of the VRS system and move to self-managed solutions. While 2011 VRS charges are only $232, the amount is expected to significantly increase as administrative fees and debt service for the funds borrowed by the General Assembly are phased in over the next five years.
Clarke County’s decision to opt-out of the VRS program is an educated bet by the Supervisors that county staff can find a better way to manage its LODA funds rather than passing the responsibility on to the VRS.
One LODA solution being evaluated by the county is a program offered by the Virginia Association of Counties (VACo). While large Virginia counties and cities typically have enough resources to self-insure against risk in programs like LODA, smaller localities like Clarke County run the risk that a catastrophic event could cause its LODA rates to become unmanageable. To address this risk concern, VACo has designed a LODA management program that allows smaller localities to pool their risk and reduce program costs as well as provide centralized fund management and lower administrative costs.
In Clarke County’s case, the LODA benefit cost for career paid staff in Clarke County for fiscal year 2011 totaled $9,217 while the cost for volunteer staff, primarily county fire companies, totaled $8,400. Clarke County has only had one LODA claim since passage of the legislation.
So far, VACo’s cost estimates are significantly lower than VRS. VACo is currently estimating $194 per full time position and $48.50 per volunteer position.
“Clarke County has chosen to join the VACo pool with anticipated first year costs of about $17,600” said Ash. “This is a new expense that is directly attributable to the action of the General Assembly. In the effort to retain control by billing localities for costs, the state has made it easy to determine the exact cost of this unfunded mandate, at least in the first year.”