OC adds new pension tier

The Orange County Board of Supervisors on Tuesday unanimously approved a “historic” pension plan that creates a new tier for employees and the potential option to choose their own plan -- at a cost savings of at least $10 million the first year and possibly millions more thereafter.

The plan, which will allow the county to deal with a roughly $3 billion unfunded liability, is heralded as a potential model for the rest of California. Its approval came as the state unveiled a budget proposal that calls for taking millions of dollars from local governments. Orange County is likely to lose $89 million to $93 million, according to the county Executive Office.

“The governor walked away from pension reform as part of the overall budget discussion,” said county Executive Officer Thomas Mauk. “So that leaves Orange County as a leader in this area.”

The two-tier plan requires legislative approval of Senate Bill 752, written by state Sen. Louis Correa (D-Santa Ana). A vote on the bill is expected next month.

“It is a breakthrough program that both the workers, the Orange County Employees Assn. and the county of Orange have agreed to,” Correa said. “It’s one [plan] that I think could serve as a role model for the rest of the state.”

Under the plan, incoming employees as of March 1, 2010, would have the option to choose the older pension plan of 2.7% of the average of an employee’s 36 months of highest salary at age 55, or 1.62% at age 65, which includes a 401(k)-style retirement account with up to 2% employer matching. Existing county employees would also be given the chance to move down to the new tier.

The lower tier is expected to appeal to new hires who may not stay with the county long or those who may need more money in their pockets now.

If the bill is not approved, then all new employees will come in under the reduced plan.

But county officials, who have worked on and negotiated a two-tier option for six months, were optimistic that the legislation would pass given its support among both Democrats and Republicans.

“This was a clear demonstration that labor organizations, public employee unions and public employers can work together if they’re both committed to finding solutions that do not negatively impact either party,” said Nick Berardino, general manager of the Orange County Employees Assn., representing 13,500 workers.

Board of Supervisors Chairwoman Patricia Bates said the county would be a “trendsetter” with the new plan. Mauk lauded it as “monumental.”

But Supervisor John Moorlach said the county would continue to deal with a large unfunded liability. “This pig is still going to go through the python,” he said.

The county has been involved in a lengthy lawsuit against the Assn. of Orange County Deputy Sheriffs to roll back increased pension plans approved in 2001. Last week, Los Angeles County Superior Court Judge Helen Bendix rejected the county’s argument that the plans violated state constitutional limits on deficit spending and were a gift of public funds since the retirement benefits were granted retroactively. It was the second time Bendix has rejected the county’s suit.

The county has 60 days to appeal.

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tami.abdollah@latimes.com