It’s time for the Orange County Board of Supervisors to face the music.
Adding to our current pension woes is the Orange County Employee Retirement System (OCERS) which has an unfunded pension obligation of $238 million for those public service employees earning “specialty pay.” That group includes deputies of the OCSD engaged in extra training, swat teams, field trainee, motors and other covered categories. Somehow, someone overlooked setting aside funds for this “specialty pay” where the current obligation has grown to $238 million. That Juice readers is not “chump change.”
Did the BOS claim that County wages had only increased by 3% two years ago only to have a newly hired Actuary challenge that figure and pegged the increase closer to 8-9%?
I wonder if in our mid year budget review if the Mission Viejo City manager has set aside any contingency money to cover any request from the County as our fair share of this additional financial obligation that someone must eventually cover.
Calculating any Contract City share becomes tricky. Simply look at the OCSD when we have Deputies who move around while serving in different years and in different contract cities.
This whole topic of our pension shortfall opens up a door that no one wants to look beyond. My crystal ball does not see Orange County filing for bankruptcy protection.
However, if it happened don’t assume that as a County employee you will still receive 100% of your pension. It won’t happen. You might get 50% and be grateful at that.
During the March 20th “Politics of Aspiration” conference in Newport Beach one of the panelists was OC Treasurer/Tax Collector Chriss Street whose presentation was entitled “The SMART Way to Return Gold to the Golden State.”
SMART is the acronym for “Self Managed Alternative Transfer” that would provide voluntary options to our County employees.
Quoting from Treasurer street’s presentation:
“Currently retiring employees may elect on retirement only to be paid in cash for 100% of their career employee contributions to the Plan, compounded by 5% annually. Currently only an occasional retiree chooses this option.
Employees participating in the defined contribution plan will not be required to make the 15-17% biweekly contributions. The Plan Sponsor will contribute 15% of salary towards retirement, but those dollars would instead be directed to the employee’s SMART account. Footnote: Percentages are based on current contracts between the County of Orange and various labor organizations. The percentages vary slightly depending on the contracting agency. Example: Police have not historically contributed towards their retirement.
Employee Advantages.
Employees will no longer be forced to contribute the 15% monthly deduction to fund their retirement and will realize the money as an increase in their current paycheck. The employer will make a 15% contribution to the employee’s self-directed Defined Contribution (DC). We expect many employees will jump at this voluntary option.
In a SMART plan, employees have the right to withdraw their money from the DC Plan in order to meet an immediate financial need such as a first time home purchase, a child’s college tuition or unexpected medical expenses. Although taking money out of a “qualified plan” is a taxable event, it has no impact on sponsoring government agency and gives greater control to the individual.”
A best case scenario, if the County employees would agree to switching from a DB to the SMART DC pension would decrease the gap for underfunding by $1.4 billion.
The challenge is closing the sale which is currently outside my pay grade.
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