It’s been more than four months since Baton Rouge’s retirement board recommended major cutbacks to the city’s controversial retire-rehire program, arguing it’s cost to taxpayers could run afoul of the IRS. But Metro Council has yet to schedule a vote on the changes because some of its members fear they could make it hard to keep essential staff.
The “retire/rehire” system allows employees to retire and begin collecting benefits, but continue to be paid for up to 29 hours of work a week. Those employees are also no longer required to contribute to the retirement system because they’re considered part time.
In February, the parish retirement board of trustees recommended big changes. Retirees would have to wait at least 6 months — instead of just one day — before returning to work, with no emergency exceptions. It also recommended employees be limited to 25% of the wages they earned when they retired, and that they can only be re-employed for 1 year, except in “extraordinary circumstances.”
The board proposed those changes because its actuary said the retire-rehire system’s high cost could cause the system to run afoul of the Ineternal Revenue Service.
If approved by the Metro Council, the changes would not affect the roughly 50 employees currently using the retire/rehire system. But they would apply to any employee hoping to use the system in the future.
Some council members say that would make it harder to obtain veteran, high-ranking staff, something the parish is already struggling with. In the spring, Metro Council members Dwight Hudson and Rowdy Gaudet to delayed an anticipated vote to try to soften some of the changes.
For example, they asked if the seperation period could be 60 days instead of 6 months, if the limit on wages could be higher than 25%, and if employees could be rehired for as long as 10 years instead of 1.
“I do think there’s a balance that can be found so that you have adequate succession planning but you can also backfill some of those gaps that are going to be created inevitably in the current economy,” Gaudet said.
J. Daniels, chair of the retirement board, declined to comment.
Retire/rehire has been controversial for years. In 2018 Metro Council rejected a move to scrap it entirely.
Some in parish government are still trying to prevent or limit the changes.
At the retirement board’s monthly meeting last month, tax attorney Robert D. Klausner said the parish could get its rules square with the IRS by simply changing the wording of its 401(k) rules — not by actually scaling back the retire-rehire system.
Several Metro Council members attended that meeting. Gaudet said it showed the need for more discussion before changing the system.
For me, everything is on the table right now for what a program could look like,” Gaudet said.
During the meeting, Daniels voiced apprehension about using Klausner’s recommendation as a silver bullet because it would only truly benefit city-parish employees, where a bulk of the retire/rehires work. The board has a fiduciary responsibility to the entire system, which also includes the fire department, the police department and the city-parish parks and recreation system, Daniels said.
Klausner, along with board attorney Robert E. Tarcza and board legal counsel Denise Akers, were asked to work together to create further proposals for the board and the Metro Council to review prior to the board’s July 28 meeting.
Gaudet hopes a final version of the ordinance can be returned to Metro Council sometime in August, although that timeline could change, he said