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Long-term employee


Flowers, who makes $157,430 a year and has been department director since 1994, is in a favorable retirement situation because of a convergence of events. He went to work for the department when he was still in college and has 43 years of service. In 1998, he enrolled in the Tier 1 deferred retirement option program. That froze his future retirement benefit at roughly $73,000 a year (applying the standard formula against his three highest years of pay), plus 3 percent annual cost of living increases.

Under the plan, 90 percent of that $73,000 was paid into a deferred retirement account, untaxed, while he continued to work and draw regular pay. Flowers no longer needed to make his 6 percent retirement contribution; the state didn't have to make its 12 percent contribution. When that five-year period was complete, Flowers decided not to retire but to take advantage of a new Tier 2 retirement option adopted for all highway employees. There were givebacks. He resumed making a 6 percent contribution. The amount paid into the deferred account was 79 percent of his future benefit, not 90. Highway officials said those givebacks made his continued option cost-free to the system. Participants can stay in Tier 2 until their 65th birthday, in December for Flowers. Then they must retire.

The money has piled up. By federal formulas, Flowers this year reached the point that the vested worth of his guaranteed retirement benefits plus the annuitized worth of his deferred retirement account was $195,000 a year. At that level, states must roll excess amounts accumulated by such employees into a different type of retirement plan or risk serious penalties for their entire retirement plan.

Larry Dickerson, who supervises the highway retirement system, said there are at least two employees with enough years and sufficient pay to qualify eventually for similar consideration in the future. Flowers told me he wouldn't have agreed to the legislation had it been to benefit only him.

Kerr added, "It otherwise would have cost the state a lot of money." But he also said it proves a point about retirement law. "If we have to create concessions to meet obligations of a few, we're going to end up upside down with the IRS code."

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