Guest column by Linda Herman.
A Montgomery Perspective post on June 24 questioned the pending move of the Montgomery County Employee Retiree Plans (MCERP) office from the Executive Office Building in Rockville to a “palace” in North Bethesda. A June 30 reply from the three County union trustees on the retirement-related investment boards defended the move.
As the trustee representing County retirees on the boards, I feel an obligation to respond. Putting aside the issue of the new building’s amenities (including a sauna, basketball and bocce courts, and batting cage), here are the facts:
1. MCERP’s current office in the EOB is rent-free. The new lease would cost $3.3 million over 11 years and millions more if the lease is extended. These are trust fund dollars whose sole purpose is to protect and support our retirees. Trust fund dollars were used just last year to move the office to expanded and renovated space within the EOB.
2. For most employees and retirees, the EOB location in the Rockville core is far more convenient than the North Bethesda building, which lacks access to public transportation. For the 22-person staff, proximity to other County offices in the EOB that work closely with the retirement plans is a strong asset that would be lost.
3. Half of MCERP’s staff works on benefits administration and interacts with employees and retirees. In May they were shifted to the Finance Department, which is located in the EOB. The remaining staff members, who interact with investment managers, are the ones who would move. Most of them work remotely three days a week. How can we justify paying for more than half a floor of vacant space? How would this benefit employees and retirees?
4. Ever since Covid, MCERP has provided excellent pre- and post-retirement seminars and consultation virtually. This is a great convenience to employees and retirees. Benefits staff members also provide excellent in-person assistance in the EOB on request. Since this process works well now, why would we change it?
So what is behind the union trustees’ over-the-top rhetoric in defense of this costly lease? They, along with the former executive director – who was suspended and dismissed in April — have an agenda. They want the retirement plans, with assets of more than $8 billion, to be “independent” of the County. No more pesky internal controls or checks and balances – they would report to themselves. The union trustees already dominate County labor relations. Now they want to dominate the investments and management of the retirement plans.
They also want to control setting the retirement plans’ actuarial assumptions. That could raise their leverage in collective bargaining and increase their own retirement benefits – a conflict of interest and a violation of County law – and could force County taxpayers to contribute millions more to the retirement plans than needed. They want to have sole authority to hire, evaluate, and compensate the executive director, who would implement their agenda. And they want the office to be remote from County oversight.
I know the retirement plans well. After 26 years at WSSC overseeing its retirement plan, I started with the County as Senior Investment Officer in 1999 and served as executive director from 2004 until I retired in 2022. Our team’s investment results were in the top 10 percent of our peers nationwide, resulting in the County achieving a funded status of over 100%, almost unheard of with public retirement plans. I deeply appreciate the confidence in me that our retirees and our elected officials have expressed. I looked forward in retirement to focusing on my volunteer activities and my grandchildren. But when the union trustees blocked the nominee of the Montgomery County Retired Employees’ Association (MCREA) to represent County retirees on the investment boards, MCREA asked me to serve. Initially, the union trustees blocked my appointment too. I was finally confirmed last October.
Why did they try to keep me off the boards? Why did they decide last December to demand publicly that the County Executive remove me from the boards even before I had attended my first meeting as a trustee, while also denouncing the Chief Administrative Officer – unhinged attacks that the County Executive strongly rejected and sharply criticized? Their June 30 post smeared me again. No other County stakeholders and fiduciaries conduct themselves in this way.
In December I wrote: “As a fiduciary, my duty of loyalty… is to act ‘only in the best interest of the participants and their beneficiaries.’ Defamatory smears and bullying will not deflect me from that duty. Neither I nor any other trustee will be intimidated.” I also wrote: “I would welcome an intensive review by the Inspector General and the Ethics Commission to determine who is actually violating County standards.” The union trustees and the former executive director say they are guided by fiduciary duty. They are guided instead by self-interest.
Everyone associated with the retirement plans, from the investment boards to our elected officials, needs to honestly face up to what our fiduciary duty to County employees and retirees requires of us. The immediate first step for the investment boards is to withdraw from the costly and unnecessary lease for new office space in North Bethesda. Spending trust fund dollars for that lease simply cannot be reconciled with our fiduciary duty to County employees and retirees.