O.C. Wants Pension Fund Gap Validated

The Orange County retirement board said Monday it would give a consultant a month to review findings that the long-term funding of pensions for county workers was short about $2.3 billion -- almost twice the shortfall previously estimated.

County officials said that if the financial assumptions in a report released Friday were confirmed, the county would have to increase its employee pension contributions more than 50%, to $300 million a year from $190 million, starting July 1, 2006. County employees also would be asked during contract negotiations to increase their contributions to the pension pool.

But before making that recommendation, the county’s chief financial officer, Edward Corser, said he wanted to know why the retirement system’s previous actuary didn’t reach the same conclusions the Segal Co. did in the recent report.

Previously, the gap for the Orange County Employees Retirement System was $1.3 billion in a fund with $5.5 billion in assets. But Segal’s new study suggests the system is underfunded by about $2.3 billion.

Much of the difference, Corser said, can be attributed to how Segal used different methods and made different assumptions in reaching its conclusion.

Segal assumed, for instance, that the fund’s investments would return less than previously assumed and that the county’s payroll would continue to increase, thereby raising pension amounts.

“The previous report didn’t take those into account, and we would like to know why,” Corser said.

The county’s unions, unhappy with the retirement fund’s recent performance, suggested in a May 23 letter to county executives that the county switch to the California Public Employees Retirement System.

Nick Berardino, general manager of the Orange County Employees Assn., said CalPERS was better managed, since it had allowed the state to reduce its pension contributions for the coming fiscal year by 4.7%.

Orange County’s 10-member retirement board includes representatives of taxpayers, current and retired county employees and public officials, including Orange County Treasurer-Tax Collector John M.W. Moorlach. The board helps develop investment strategies to fund retirement for county government’s 9,400 retirees, a number that will grow as the 15,000 employees currently covered by the pension plan retire.