RIVERSIDE – Riverside County’s unfunded pension liabilities are at $1.55 billion, but thanks to reforms enacted by the Board of Supervisors, closing that funding gap will be less onerous, according to a report that the board will review today.
The county’s Pension Advisory Review Committee has issued a comparatively brief 11-page assessment of the retirement system that covers around 38,000 current and former employees. Last year’s report was just under 50 pages long.
The board will delve into the latest report during its policy agenda, when Chief Financial Officer Ed Corser is expected to give a presentation.
According to the PARC’s findings, the county has $6.22 billion in assets — or about 80 percent of what would be required to meet all annuities now on the county’s books. The report noted that pension plans are generally considered ”sound” whenever the funded ratio is above 80 percent.
The report’s authors — Corser, Treasurer-Tax Collector Don Kent and Department of Human Resources Director Michael Stock — said that, as long as the financial markets aren’t roiled by excess volatility and the economic climate remains reasonably stable over the next decade, the county should be able to close its funding gap with the California Public Employees Retirement System, or CalPERS.
The committee predicted the county would be in a position to prepay $90 million in CalPERS liabilities over the next year. Officials were also optimistic about amortizing the remaining $334 million in pension obligation bonds sold in 2005 to help bolster the retirement system. Some of the bonds have maturity dates of 21 years and are paying holders close to 5 percent annually.
Positive assumptions are based on the proposition that CalPERS’ investments will hit their target of 7.5 percent in annual returns, according to the PARC report. The value of CalPERS’ assets is still 27 percent below what it was in 2008, prior to the Great Recession.
Every quarter-point decline in returns leads to about $20 million more that the county has to pay into CalPERS to make up any shortfalls, officials said.
As with last year’s digest, the PARC report touted the anticipated $74 million in annual savings the county will realize as a result of pension reforms implemented in 2012.
Under pre-2012 plans negotiated with collective bargaining units, public safety workers accrued retirement earnings according to a ”3 percent at 50” formula, fixing compensation at 3 percent of the average of the three highest- paid years of an employee’s career, multiplied by the number of years on the job. An employee could begin collecting full retirement at age 50.
Miscellaneous workers, including clerks, technicians and nurses, received benefits based on a ”3 percent at 60” formula.
Beginning September 2012, new hires in the safety category began accruing retirement benefits under a 2 percent at 55 formula, while newly hired miscellaneous workers began accruing benefits under a 2 percent at 60 formula. Legislation signed into law by the governor added another category for public sector employees hired after Jan. 1, 2013. The lower benefit formula is 2 percent at 62 for miscellaneous and 2.7 percent at 57 for safety workers.
Some of the biggest savings netted from the board-approved pension modifications will come from the phasing out of so-called ”employer-paid member contributions,” or EPMC. The practice, instituted in the early 2000s, spared workers from having to pay their own contributions into CalPERS accounts, shifting the expense instead to taxpayers.
For miscellaneous workers, the contribution amount equals 8 percent of gross earnings, and for safety workers, it’s 9 percent. That’s on top of the county’s matching contributions.
EPMC will be completely phased out this fall.