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Extracted from Consolidated Report

This investigation was originally published as part of a larger consolidated report containing multiple investigations. View the consolidated PDF for the complete document.

Orange County Grand Jury • 2015-2016

Orange County's $4.5 Billion Unfunded Pension Liability & Retirement Plans

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Findings and Recommendations 9 findings

F1 Page 385
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.
Related Recommendations (3)
R1
Page 386
The County should encourage the OCERS Board of Retirement to maintain financially sound assumptions and to oppose any relaxation of current assumptions. (F1)(F3)
R2
Page 386
The County should establish and adopt a plan, working with OCERS, to increase the pension percent funded liability to 80% from its current level of 70% by making additional payments to OCERS. This plan should be developed as part of the County Strategic Financial Plan is being updated in late summer 2016. As the 2017-2018 budget is being developed, the first advance payment of the Plan should be included. (F1) (F2)
R5
Page 386
The County should conduct a thorough analysis including the financial impact of implementing a Defined Contribution Retirement Plan or a hybrid plan, replacing the current Defined Benefit Plan, before January 2017. (F1) (F7) REPORT 9 Orange County’s $4.5 Billion Unfunded Pension Liability & Retirement Plans 2015-2016 Orange County Grand Jury
F2 Page 385
The County should have developed a plan to curb the growth in unfunded pension liability independent of OCERS.
Related Recommendations (1)
R2
Page 386
The County should establish and adopt a plan, working with OCERS, to increase the pension percent funded liability to 80% from its current level of 70% by making additional payments to OCERS. This plan should be developed as part of the County Strategic Financial Plan is being updated in late summer 2016. As the 2017-2018 budget is being developed, the first advance payment of the Plan should be included. (F1) (F2)
F3 Page 385
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.
Related Recommendations (1)
R1
Page 386
The County should encourage the OCERS Board of Retirement to maintain financially sound assumptions and to oppose any relaxation of current assumptions. (F1)(F3)
F4 Page 385
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.
Related Recommendations (1)
R3
Page 386
The County should develop a policy to continue issuing short term Pension Obligation Bonds, so long as the discount from OCERS is available and there is enough net savings (which should be defined) after paying for cost of issuance and underwriter’s discount. (F4)
F5 Page 385
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 Page 385
Passage of the state Public Employees’ Pension Reform Act of 2013 should improve the financial stability of the County’s retirement system.
Related Recommendations (1)
R4
Page 386
The County should direct its lobbyists or work through the California State Association to find support in the legislature for a bill with additional pension reforms, beginning with the next legislative session that would further reduce the impact of unfunded pension liabilities. (F6)
F7 Page 385
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.
Related Recommendations (1)
R5
Page 386
The County should conduct a thorough analysis including the financial impact of implementing a Defined Contribution Retirement Plan or a hybrid plan, replacing the current Defined Benefit Plan, before January 2017. (F1) (F7) REPORT 9 Orange County’s $4.5 Billion Unfunded Pension Liability & Retirement Plans 2015-2016 Orange County Grand Jury
F8 Page 385
County employees are not treated equally as relates to retirement benefits. Orange County utilizes and contributes to several Defined Contribution Plans as supplemental retirement REPORT 9 Orange County’s $4.5 Billion Unfunded Pension Liability & Retirement Plans 2015-2016 Orange County Grand Jury 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.
Related Recommendations (1)
R6
Page 387
The County should review the current practice of using taxpayer money to benefit eight non-County employees through the 401(a) retirement plan (Executive Director LAFCO; Executive Manager- Children & Family Commission and six OCERS executives). (F8)
F9 Page 388
Orange County Board of Supervisors X X X X X X X X X 90 Day Required Responses:
No recommendations for this finding

Additional Recommendations 2

These recommendations are not explicitly linked to specific findings.

Agency Responses 1

Government agencies' official responses to this report's findings and recommendations. Click on a response to see the structured breakdown.