Agenda Item   

AGENDA STAFF REPORT

 

                                                                                                                        ASR Control  08-002189

 

MEETING DATE:

10/21/08

legal entity taking action:

Board of Supervisors

board of supervisors district(s):

All Districts

SUBMITTING Agency/Department:

County Executive Office   (Approved)

Department contact person(s):

Thomas L. Beckett 

 

 

Bob Franz

 

 

Subject:  Request from United Employee Organizations of Orange County

 

      ceo Concur

County Counsel Review

Clerk of the Board

Concur

N/A

Discussion

 

 

3 Votes Board Majority

 

 

 

    Budgeted: N/A

Current Year Cost: N/A

Annual Cost: N/A

 

 

 

    Staffing Impact: No

# of Positions:

Sole Source: N/A

    Current Fiscal Year Revenue: N/A

    Funding Source: N/A

 

    Prior Board Action: June 6, 2006

 

RECOMMENDED ACTION(S)

 

Review the request from the United Employee Organizations of Orange County and provide direction to the CEO regarding followup.

 

 

 

SUMMARY:

 

The County Executive Office (CEO) requests the Board review the  request from the United Employee Organizations of Orange County (UEOOC) to initiate the process for the County’s participation in the California Public Employees’ Retirement System (CalPERS) and to contract with CalPERS for actuarial valuations, and provide direction to the CEO regarding followup.

 

 

BACKGROUND INFORMATION:

 

The County Executive Office (CEO) has received a request from the United Employee Organizations of Orange County (UEOOC) to initiate the process for the County’s participation in the California Public Employees’ Retirement System (CalPERS) and to contract with CalPERS for actuarial valuations.  The UEOOC request is in response to potential increases in rates resulting from changes in assumptions by the actuary retained by the Orange County Employees Retirement System (OCERS).  The formal request was signed by officers of the following employee associations:  Association of Orange County Deputy Sheriffs, Orange County Attorneys Association, International Union of Operating Engineers, American Federation of State, County and Municipal Employees, Orange County Employees Association, and United Employee Organizations of Orange County.

 

In July 2005, the Board of Supervisors directed the CEO to evaluate CalPERS as a possible alternative to OCERS and provide an employer cost comparison.  The CEO returned to the Board in June 2006 with a report on the employer cost comparison between OCERS and CalPERS and recommendation that the County should remain with OCERS.

 

In order to research the transfer process, legislative requirements, cost comparisons, and other issues, a series of working sessions occurred between 2005 and 2006 involving representatives of the CEO, Human Resources, County Counsel, CalPERS representatives, OCERS representatives, and the various County labor organizations.  Subsequently a core team of professional actuaries and consultants representing all of the aforementioned entities worked diligently in reviewing the actuarial and economic issues and the assumptions and methodologies underlying the cost calculations.

 

CEO Staff confirmed that legislative change would be required both to leave OCERS and to join CalPERS, and legislation would also be required for CalPERS to offer the same benefit structure and level as OCERS.

 

The final product of the analysis and calculations of the two hypothetical cases representing OCERS and CalPERS determined that the employer rates for OCERS were 62 basis points ($6 million) lower than the CalPERS rates. 

 

Also included in the analysis was the review of the comparative historical and projected investment earnings rates for OCERS and CalPERS.   PFM Advisors, an independent investment consultant, was engaged to conduct a general review of both retirement systems’ investments.  The PFM report concluded that due to the more conservative nature of the OCERS asset allocation, CalPERS would perform better during rising markets while OCERS would perform better during falling markets.  Based on historical data, the long term comparison of investment earnings of the two systems was roughly even.

 

The PFM report also confirmed that there would be a series of actions necessary to effect a transfer from OCERS to CalPERS, including legislative actions, employee approval through an election process, and a valuation of the assets for transfer.

 

The final conclusion of the staff report was that the comparisons resulted in little difference between the two systems in employer costs, therefore there would be no reason to consider transferring the County’s retirement plans to CalPERS. 

 

A comparison of investment portfolio earnings data was prepared by PFM in 2006.  Recent comparative earnings are similar to the finding of PFM. The 2005-06 review required an actuarial review by CalPERS at a cost of $49,900, an investment review by PFM at a cost of $10,000, and additional actuarial review by the County's actuary, Bartel Associates.

 

As of July 31, 2008, the following are the one, three and five year total net returns for each system:

 

                                      1 Year                           3 Year                           5 Year

OCERS                          -.047%                          8.16%                             9.73%

 

CalPERS                        -1.67%                          7.62%                             10.66%

 

 

 

 

 

FINANCIAL IMPACT:

 

N/A

 

STAFFING IMPACT:

 

N/A

 

EXHIBIT(S):

 

Agenda Staff Report dated June, 6 2006, Request from United Employee Organizations of Orange County, PFM Review of Retirement Plans