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Early retirement program could save Lombard $2.9M

LOMBARD — March marked the retirement month for three men who made their careers in the public works field: Dave Cilella, Al Jones and Larry Trojanowski. It also marked the beginning of a year-long string of retirements in the village of Lombard, thanks to an early retirement incentive program the village is offering.

The program began March 15 and will continue through March 15, 2014, said Tim Sexton, finance director for the village, and could bring savings of $2.9 million over the next seven years.

Under this early retirement program, employees who have worked with the village of Lombard, or with another municipality that is involved in the Illinois Municipal Retirement Fund, for a minimum of 20 years and who are at least 50 years old are eligible.

Normally, the retirement age is 55, but the early retirement incentives allow employees to pay a maximum of five years’ worth of contributions at once to the Illinois Municipal Retirement Fund and retire early.

Each year, an employee pays 4.5 percent of his or her salary into the fund, but with the incentive program, a 50-year-old worker with 20 years of service can pay
22.5 percent of his or her salary — the equivalent of five years of payments— and retire, Sexton said.

There also is a cost to the village for allowing its employees to retire early. The amount varies depending on the individual’s years of service, his or her marital status and other factors, but for each retiree, the village has to pay a specified amount of money.

In a presentation he made to the Board of Trustees, Sexton ran a model that assumed every eligible employee took the early retirement option, and showed the break-even point for the village — after it had paid out its contribution for each retiring employee — would be 4.4 years.

He also ran a model five years into the future, which indicated that in the few months following the break-even point, the village will have projected savings of nearly $700,000. The savings are expected to continue years into the future, he said.

A few different factors contributed to the village’s decision to offer the incentives, he said.

First, in 2011, a Tier II pension option went into effect, which requires less of a financial commitment from municipalities, Sexton said. Any workers hired with the village now will be eligible for the Tier II pension.

Sexton said another contributing factor was the village’s new contract with its public works union. Under the contract, the starting salary for new hires is $40,000, which is significantly lower that the $46,000 starting salary previously in place.

About half of the employees eligible for early retirement are in the Public Works Department, he said.

He said the village considered offering early retirement a few years ago before the pension and contract changes happened and it didn’t make sense. Now, it does.

There are 40 employees in the village who are eligible for retirement this year, and about half have formally announced their intent to retire, Sexton said. In all, he expects that about 75 percent of those eligible will retire.

“We suspect that many of them will take it,” he said. “Probably the vast majority of them will take it.”

As for replacing the retirees, Sexton said that will be done on a case-by-case basis. Some positions will be immediately replaced, while others might be filled by two part-time workers or contracted out.

Sexton’s savings projections assumed that every position would be filled. If the village decides not to replace every retiree, that will mean additional savings.

“We’ll look at each position as it comes up,” he said.

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