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Orange County Grand Jury
• 2016-2017
Orange County’s $4.5 Billion Unfunded Pension Liability & Retirement Plans Grand Jury 2015-2016
⚠️ Translation Notice: This content has been automatically translated. The original English text is the official version. Translation may contain errors.
⚠️ Este contenido ha sido traducido automáticamente. El texto original en inglés es la versión oficial. La traducción puede contener errores.
Findings and Recommendations 9 findings
F1
The County, in part, is responsible for the unfunded pension liabilities to increase from a surplus of $130,000 in 2000 to $4.5 billion as of December 2012. This represents an increase of more than 4,500% since year 2000.
No recommendations for this finding
F2
The County should have developed a plan to curb the growth in unfunded pension liability independent of OCERS.
No recommendations for this finding
F3
The County and OCERS have taken recent actions to control and slightly reduce the unfunded liabilities by 11% from $4.5 billion in 2012 to $3.8 billion in 2015, but the County could be more aggressive.
No recommendations for this finding
F4
Issuing short term Pension Obligation Bonds (7 of past 10 years) to achieve taxpayer’s savings of over $100 million during the past decade was a good decision by the County.
No recommendations for this finding
F5
OCERS Board of Retirement made a solid financial decision to reduce the amortization period of the UAAL from 30 years down to its current period of 20 years, resulting in increased annual payments from the County.
No recommendations for this finding
F6
Passage of the state Public Employees’ Pension Reform Act of 2013 should improve the financial stability of the County’s retirement system.
No recommendations for this finding
F7
The State and local governments have the ability to implement Defined Contribution Plans, or hybrid plans, instead of the traditional Defined Benefit Plan. Much of the private sector has transitioned to the Defined Contribution Plans such as 401K plans and more than 30 jurisdictions in California use Defined Contribution Retirement Plans, including Orange County.
No recommendations for this finding
F8
County employees are not treated equally as relates to retirement benefits. Orange County utilizes and contributes to several Defined Contribution Plans as supplemental retirement 2015-2016 Orange County Grand Jury Orange County’s $4.5 Billion Unfunded Pension Liability & Retirement Plans plans to OCERS and one of the plans is restricted to “select” employees and all elected County officials. Additionally, the County has eight non-County employees in the exclusive 401(a) plan.
No recommendations for this finding
F9
Orange County has not designated unfunded liability reduction as a priority either by action or in its Strategic Financial Plan. RECOMMENDATIONS In accordance with California Penal Code §933 and §933.05, the 2015-2016 Grand Jury requires (or as noted, requests) responses from each agency affected by the recommendations presented in this section. The responses are to be submitted to the Presiding Judge of the Superior Court. Based on its investigation titled “Orange County’s $4.5 Billion Unfunded Pension Liability & Retirement Plans”, the 2015-2016 Orange County Grand Jury makes the following seven recommendations:
No recommendations for this finding
Conclusions 1
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CL1Through the process of conducting personal interviews, reviewing numerous financial documents, and comparing data from other large California governmental entities, the Grand Jury concludes that Orange County is taking adequate, but not aggressive action to reduce the unfunded liability and therefore, is adversely affecting the level of service to the public that it could provide if the liability was eliminated. There is a distinct disconnect between the reductions of the unfunded pension liability in recent years and the actuarial projection of the pension liabilities increasing for the next several years by nearly $500 million. 2015-2016 Orange County Grand Jury Page 21 Orange County’s $4.5 Billion Unfunded Pension Liability & Retirement Plans
Agency Responses 3
Government agencies' official responses to this report's findings and recommendations. Click on a response to see the structured breakdown.