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MEMORANDUM
TO: Board of Supervisors
FROM: Carol J. Huchingson, County Administrative Officer
DATE: June 26, 2018
SUBJECT: Consideration of (a) Resolution adopting the Post-Employment Benefits Trust Administered by Public Agency Retirement Services (PARS) and Appointing the County Administrative Officer as the Plan Administrator; and (b) Resolution Transferring the Current Balance in the Pension Stabilization Reserve (Fund 155) to the Section 115 Post-Employment Benefits Trust and Authorizing Initial Investment Portfolio Option
EXECUTIVE SUMMARY:
Scope of the Issue. Your Board has previously been apprised of escalating pension costs and the challenge of ensuring that pensions are sufficiently funded. The County pension plans managed by California Public Employees Retirement System (CalPERS) consist of the "Miscellaneous Plan", which covers approximately 82% of County employees, and the "Safety Plan" with approximately 18% of employees.
Funding of CalPERS pensions relies on three sources: a) employee contributions, which are in an amount fixed by law; b) investment returns, which vary according to financial market performance; and 3) employer contributions, which are increased or decreased in accordance with the performance of the other two funding sources in order to meet the expected funding need. Although CalPERS dictates the annual required employer contribution, the fact is, their required contribution levels have been insufficient to meet the actuarially determined funding requirements. CalPERS indicates that the primary reason for this shortfall is their underperforming investment returns which CalPERS relies upon for over 60% of pension funding. Consequently, the accumulated pension assets are only 70% of the amount needed to the pay what the County is likely to owe current and retired staff. This 30% shortfall in funding is commonly known as the unfunded accrued pension liability.
It is in the County's interest to reduce the amou...
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