Stanislaus may suspend retirees' 'ad hoc' benefits

To try to stem rising public employee pension costs, Stanislaus County's chief executive officer asked a retirement board Wednesday to postpone paying some benefits to retirees, including a health care subsidy and cost-of-living increases.

County CEO Rick Robinson said the "ad hoc" benefits, which never were part of labor agreements, need to be reconsidered as the Stanislaus County Employees' Retirement Association deals with the ailing system that funds pension benefits for county retirees and employees from Ceres and five special districts.

The county may have to contribute an additional $22.7 million in the 2009-10 budget year, which starts July 1, to shore up the retirement system, a cost that would worsen a county budget deficit and lead to layoffs and "unprecedented" public service cuts, Robinson said.

The retirement system is able to issue pension checks for the foreseeable future, but the possible loss of ad-hoc benefits concerned many of the retirees attending the StanCERA meeting at the Salida Library. About 250 people filled the seats in the community room and dozens more stood outside.

The retirement board took no action on Robinson's requests or any other options for dealing with the pension fund. The discussion will continue at a special meeting April 24 and final decisions could be made at the board's regular meeting April 28.

Retirement board members asked their legal and actuarial consultants about taking legal action against a firm they claim misadvised them in setting employer contributions in the past. The consultants said litigation was possible or a complaint could be filed with regulators for possible discipli- nary action. It remained unclear what the board will do.

The ad-hoc benefits are funded by reserves that make up 20 percent of the retirement system's assets.

County officials are concerned that those reserves have not been part of the calculations that determine how much the county must put into the retirement system to fund regular benefits for 2,700 retirees and surviving beneficiaries.

Robinson asked StanCERA to incorporate the reserves in setting the contribution rate, which could lower how much the county has to pay. With the county facing another sizable increase in the 2010-11 budget year, he also asked the board to commission an analysis of how the stock market decline and other investment losses this year will affect the contribution rate.

System 'eaten by two tigers'

StanCERA, like other public employee retirement systems across the country, is suffering from severe losses in its investment portfolio. But actuaries said Wednesday the system is being "eaten by two tigers," the second being the faulty assumptions made by the board's previous actuarial firm, Buck Consultants.

According to the new actuaries, Buck Consultants overstated the number of employees who will cash out benefits when they reach retirement eligibility. Veteran employees are much less likely to opt for lump sum payments today or seek employment elsewhere.

The previous firm also improperly calculated retirement rates, the experts said.

Because of the faulty assumptions, StanCERA didn't collect enough employer contributions in previous years and has to increase the rates.

The retirement board will consider options to soften the blow to the county, such as amortizing the unfunded liabilities for a longer period of time.

Actuary Bob McCrory said the ad-hoc benefits frequently are an issue for retirement systems. In Stanislaus County, the benefits are funded when investment earnings exceed 8.16 percent, but excess earnings are not anticipated in the next few years.

Retirees speaking at the meeting were concerned the issue was pitting county employees against those who are retired.

Joe Martin, a retired Juvenile Hall group supervisor, is among the 2,500 people who receive the health care subsidy. The $370 a month goes toward buying health insurance for himself and his wife. "We're not unwilling to compromise because of the county budget, but they need to treat everyone fairly," said Martin, 62.

The retirement board will meet at 2 p.m. April 24 in the Board of Supervisors chamber, at 1010 10th St., Modesto.

Bee staff writer Ken Carlson can be reached at or 578-2321.