Orange County Grand Jury 2004-2005 Another County Crisis: Pensions, Health Care, and Other Benefits

5.) 7.5 Pension planning: The BOS, in conjunction with OCERS and employee unions, should explore all possibilities for broadening the county retirement system in ways that would provide more options for employee retirement planning. The goal for all parties in this quest should be to arrive at a system beneficial to both employer and employee. (See Finding 6.6.) Responses to Recommendations 7.1 through 7.5 are required from the Orange County Board of Supervisors. . Appendix 8.1 Chart 1 2004-2005 - SOCIAL SECURITY VS. OC COUNTY BENEFITS 3% @ 50 FORMULA Wages Private Industry OC County Employee SS Years of SS $ $ Year Base Age Service % Rate Contribution % Rate Contribution 1975 $14,100 21 1 4.95 $698 7.77 $1,096 1976 15300 22 2 4.95 757 7.77 1189 1977 16500 23 3 4.95 817 7.77 1282 1978 17700 24 4 5.05 894 7.77 1375 1979 22900 25 5 5.08 1163 7.77 1779 1980 25900 26 6 5.8 1502 7.77 2012 1981 29700 27 7 5.35 1589 7.77 2308 1982 32400 28 8 5.4 1750 7.77 2517 1983 35700 29 9 5.4 1928 7.77 2774 1984 37800 30 10 5.7 2155 7.77 2937 1985 39600 31 11 5.7 2257 7.77 3077 1986 42000 32 12 5.7 2394 7.77 3263 1987 43800 33 13 5.7 2497 7.77 3403 1988 45000 34 14 6.06 2727 7.77 3497 1989 48000 35 15 6.06 2909 7.77 3730 1990 51300 36 16 6.2 3181 7.77 3986 1991 53400 37 17 6.2 3311 7.77 4149 1992 55500 38 18 6.2 3441 7.77 4312 1993 57600 39 19 6.2 3571 7.77 4476 1994 60600 40 20 6.2 3757 7.77 4709 1995 61200 41 21 6.2 3794 7.77 4755 1996 62700 42 22 6.2 3887 7.77 4872 1997 65400 43 23 6.2 4055 7.77 5082 1998 68400 44 24 6.2 4241 7.77 5315 1999 72600 45 25 6.2 4501 7.77 5641 2000 76200 46 26 6.2 4724 7.77 5921 2001 80400 47 27 6.2 4985 7.77 6247 2002 84900 48 28 6.2 5264 7.77 6597 2003 87000 49 29 6.2 5394 7.77 6760 2004 87900 50 30 6.2 5450 7.77 6830 Totals $1,491,500 $89,592 $115,890 YEARLY PENSION @ AGE 50 0 $79,110 Data Source: Social Security Administration Notes: The county employee in the above example will start receiving a pension of $79,110 on the final year salary of $87,900 and in the next 16 years will collect more than $1,260,000 before the private sector employee starts receiving social security, which typically is never more than 25% of final year salary and also has maximum caps. Additional contributions of $26,298 by the county employee will be recouped in less than four months. Report—Another County Crisis: Pensions, Health Care, and Other Benefits 8.2 Chart 2 2004-2005 - SOCIAL SECURITY vs. OC COUNTY BENEFITS 2.7% @ 55 FORMULA Private Industry OC County Employee Years of SS $ $ Year Wages Age Service % Rate Contribution % Rate Contribution 1970 $7,800 21 1 4.6 359 4.29 $335 1971 7800 22 2 4.6 359 4.29 335 1972 9000 23 3 4.6 414 4.29 386 1973 10800 24 4 4.85 524 4.29 463 1974 13200 25 5 4.95 653 4.29 566 1975 14,100 26 6 4.95 $698 4.29 605 1976 15300 27 7 4.95 757 4.29 656 1977 16500 28 8 4.95 817 4.29 708 1978 17700 29 9 5.05 894 4.29 759 1979 22900 30 10 5.08 1163 4.29 982 1980 25900 31 11 5.8 1502 4.29 1111 1981 29700 32 12 5.35 1589 4.29 1274 1982 32400 33 13 5.4 1750 4.29 1390 1983 35700 34 14 5.4 1928 4.29 1532 1984 37800 35 15 5.7 2155 4.29 1622 1985 39600 36 16 5.7 2257 4.29 1699 1986 42000 37 17 5.7 2394 4.29 1802 1987 43800 38 18 5.7 2497 4.29 1879 1988 45000 39 19 6.06 2727 4.29 1931 1989 48000 40 20 6.06 2909 4.29 2059 1990 51300 41 21 6.2 3181 4.29 2201 1991 53400 42 22 6.2 3311 4.29 2291 1992 55500 43 23 6.2 3441 4.29 2381 1993 57600 44 24 6.2 3571 4.29 2471 1994 60600 45 25 6.2 3757 4.29 2600 1995 61200 46 26 6.2 3794 4.29 2625 1996 62700 47 27 6.2 3887 4.29 2690 1997 65400 48 28 6.2 4055 4.29 2806 1998 68400 49 29 6.2 4241 4.29 2934 1999 72600 50 30 6.2 4501 4.29 3115 2000 76200 51 31 6.2 4724 4.29 3269 2001 80400 52 32 6.2 4985 4.29 3449 2002 84900 53 33 6.2 5264 4.29 3642 2003 87000 54 34 6.2 5394 4.29 3732 2004 87900 55 35 6.2 5450 4.29 3771 TOTALS $1,540,100 $91,901 $66,070 YEARLY PENSION @ AGE 55 0 $83,066 Data Source: Social Security Administration Notes: The county employee in this example will start receiving a pension of $83,065 on the final year salary of $87,900 and in the next 10 years will collect more than $830,000 in pension benefits before the private sector employee starts receiving social security. The latter typically is never more than 25% of final year salary and has maximum caps. The county employee contributed $25,831 less than the private sector worker. .3 Ventura Decision Categories Following is a list of elements to be included in “compensation earnable” (Ventura Decision, California Supreme Court 1997). (cid:131) Base salary and wages (cid:131) Bilingual premium pay (cid:131) Educational incentive pay (cid:131) Aircraft rescue firefighting (cid:131) Paramedic pay (cid:131) Motorcycle bonus (cid:131) Emergency dispatch pay (cid:131) Field training officer bonus (cid:131) Shift differential pay (cid:131) Confined space pay (cid:131) Longevity incentive (cid:131) Uniform allowance (cid:131) Uniform maintenance allowance (cid:131) Payoffs of vacation, sick leave, and holiday (cid:131) Employee contributions to deferred compensation plan (cid:131) Overtime (cid:131) Compensatory time (cid:131) “Madera” pay (cid:131) Additional compensation for scheduled meal period 9. Bibliography 1. Applicable BOS agenda items 2. Various Orange County labor contracts 3. United States Social Security Administration tables 4. Orange County budget documents 5. Comprehensive Annual Financial Report, December 31, 2003, Orange County Employee Retirement Plan (OCERS) 6. Orange County Strategic Financial Plan, April 2005 7. County of Orange Fiscal Impact Analysis, Proposition 172 Funds 8. U.S. Department of Labor Statistics 9. County Employees Retirement Law of 1937 10. Interviews with elected and appointed Orange County Officials Report—Another County Crisis: Pensions, Health Care, and Other Benefits 11. “Implementing the Ventura Decision,” Resolution 98-001, February 1998, by Board of Retirement, Orange County Employees Retirement System 12. Press release: Supervisor Bill Campbell Statement regarding County Employee Labor Contracts, September 3, 2004 13. Legislative update, June 10, 2005, Military Officers Association of America 14. Orange County Funds Document, December 12, 2004 15. Press release: Statement 45, “Accounting and Financial Reporting by Employers for Postemployment Benefits other than Pensions,” August 2, 2004, Governmental Accounting Standards Board (GASB) 16. Ventura County Deputy Sheriffs’ Association, et al. (Plaintiffs and Appellants v. Board of Retirement of Ventura County Employees Retirement Association (defendant and respondent); County of Ventura (real party in interest), filed August 14, 1997, in the Supreme Court of California. 17. History of Actuarial Assumption Rates, January 1945-December 2003, Orange County Employees Retirement System 18. Orange County Employees Retirement System memo, “Contribution Rates for Fiscal Year 2006/2007,” June 15, 2005 10. Acronyms: BOS Orange County Board of Supervisors CEO OC Chief Executive Officer CFO OC Chief Financial Officer GASB Governmental Accounting Standards Board MOU Memorandum of Understanding OC Orange County OCEA Orange County Employees Association OCERS Orange County Employee Retirement System PIP Performance Incentive Program ROI Return on Investment