County Gives Retirees Extra Pension Funds

Buoyed by a hefty $220-million return on investments last year, the Orange County Retirement System board Monday approved a plan to pay retirees extra benefits, without requiring current and past employees to foot part of the cost.

The extra benefits will be paid to comply with a state Supreme Court ruling last October that Orange and 19 other counties owe their employees pensions based not only on their salaries but also on other perks, such as car allowances and bonuses.

Further, the disbursement plan, which was approved 8 to 1, calls for no increased contribution rate for current employees. Employers also will get a break on payments to the fund.

In February, the retirement system board voted to pay 6,800 retirees extra benefits to implement the state high court’s ruling, adding that the payouts should be made by July 1. Estimating that 95% of the employees will apply for reconfiguration of their benefits, the added costs could total $35 million.

Initially, the board planned to finance the payout by assessing extra contributions from the retirees and deducting the amount from their payouts. Current employees too would have had to contribute more to the retirement fund through higher payroll deductions, said Ray Fleming, the retirement system’s administrator.

But then came the good news about the investment fund.

Although the board had expected an 8% return on investments, the actual earnings were 17.8% last year, Fleming said.

Board members bristled at the word “windfall” at their meeting Monday. They stressed that the board made no high-risk investments and that the retirement system was reaping the benefits that Wall Street investors everywhere were enjoying.

“The performance [of the investment fund] was certainly exemplary,” actuary Tim Marnell told board members. But the retirement system’s funds were invested in stocks and bonds that were “mainstream, even slightly conservative,” he said.

The pension fund--worth $3.8 billion--is separate from the Orange County investment pool that suffered $1.64 billion in losses that triggered the 1994 bankruptcy. The retirement system has 20,000 members, most of them employees of the County of Orange. Workers for the Orange County Transportation and Fire authorities, Orange County Sanitation District and other special districts also belong.

Even with the payout of extra benefits, the pension system is now and will continue to be fully funded, Marnell told the board.

Further, the board has decided that 5% of the adjusted value of the system’s assets--about $130 million--will be retained as a contingency reserve.

Under the plan approved Monday, the cost to employers of fire, law enforcement and other safety employees will increase by 2.9%, which is less than earlier expected, while contribution rates for employers of general employees will dip by 0.5%.

The sole dissenting vote to the disbursement plan was cast by board member Charles V. Smith, also a county supervisor. He said he wanted to delay the decision to give the county’s top financial and executive officers more time to consider the costs.

Several other board members took offense.

“There has been none, zip, zero communication [from the county] with the board,” said Chairman Thomas N. Fox. “All of this information has been provided to the county. We’ve made it clear that the clock is ticking.”

Joan Steiner, chief of the Orange County Fire Authority’s finance, administration and human resources department, told the board that her agency is so concerned about the extra costs to employers that it is considering leaving the Orange County Retirement System and joining the California Public Employees Retirement System, the state’s giant pension fund.

“If you’ve got money to throw around,” responded board member Michael J. Carmody, “you’re welcome to do that.”