Changes to Fresno County pension program will cost employees, county more

The Fresno BeeMarch 11, 2014 

Pension contributions must rise for Fresno County and its employees next year as the county tries to address financial liabilities in its $3.5 billion retirement system.

The Fresno County Board of Supervisors voted 5-0 on Tuesday to raise pension contribution rates for employees and the county to help close the gap on system shortfalls.

The average county employee's rates will rise from 8.55% to 9.56%, which will increase total employee contributions to about $35.4 million next year. Last year, the total was $31.7 million, said Becky Van Wyk, assistant administrator for the Fresno County Employees Retirement Association.

Based on pension plan assumptions, the county will have to shell out about $23 million more next year, which would raise the county's commitment to $198 million for next year.

The main reason for the contribution increases is to make up the difference because return on investments were lower than expected.

The Fresno County Employees' Retirement Board last year lowered the average anticipated investment return rate from 7.75% annually to 7.25%.

Return rates were about 11.9% last year. The county, however, measures return rates in five-year increments, and returns from the recession years are included in those five-year rates. The county projected a return rate of 7.75% over that period but reaped only 6.96%.

When investment returns are lower than expected, Fresno County and its employees must contribute more to the pension fund to make up the difference and keep it solvent.

The lower assumed return rate will raise costs upfront for the county but eventually result in less of a financial roller coaster, said Paul Angelo, senior vice president with Segal Consulting, the county's actuarial consultant.

"I want to stress that it will make your life easier going forward," he said. "Every good year you have in the future is going to be a little bit more good and every bad year will be a little bit less bad."

The cost to the county's general fund is 30% to 35% of the $23 million hike, because the county gets federal and state money to pay for some jobs, such as those in social services, behavioral health and public health, said Vicki Crow, Fresno County's auditor-controller.

She estimates next year's net county cost at $7.6 million.

Budget estimates show that the county is about $22 million ahead of last year in revenue collection, Crow said.

The pension debt "is more manageable because our resources are keeping up with our costs a little better," she said. "That's contrasted with the great recession when costs continued to grow but resources were shrinking at the same time."

Supervisor Henry R. Perea said he thinks the pension contribution costs this year are not as daunting as in recent years.

"It is a liability this year, but we have the funds to manage it," he said.

Supervisor Judy Case said that even though taxpayers foot the bill for county, state and federal funding, she viewed Tuesday's decision as "a significant move."

She said she expects county costs to remain high for a few more years before dropping because of changes made to the pension system.

Fresno County's retirement system has 6,866 employees and 6,363 retired members and beneficiaries. The average annual retirement benefit for retired county employees is about $32,335, according to actuarial reports.

The reporter can be reached at (559) 441-6166, mbenjamin@fresnobee.com or @beebenjamin on Twitter.

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