The Stanislaus County Employees' Retirement Association is notifying retired members of plans to reallocate about $70 million remaining in a much-debated supplemental benefits reserve fund.
Under the plan, which is likely to spark ire among local government retirees, StanCERA would use the money to help offset its staggering investment losses in 2008 and 2009 to replenish a contingency reserve and help offset future employer contributions to the retirement system.
The retirement board approved a letter Wednesday to give the required notification to the Retired Employees of Stanislaus County. The group is suing StanCERA in Stanislaus County Superior Court over recent transfers from the reserve fund. It has until June 30 to respond to the letter.
StanCERA could approve a reallocation of the funds at its July 14 meeting. It administers retirement benefits for employees of the county, Ceres, the Superior Court and five special districts.
Until last year, the association used the reserves to pay up to a $370-a-month health care stipend and supplemental cost-of-living increases to local government retirees, benefits that were never guaranteed in labor contracts.
The soaring costs of funding the retirement system prompted county officials to take a critical view of StanCERA's management of the reserve fund, which once held $157 million.
Before the stock market collapsed in 2008, it was standard practice for StanCERA to pour excess investment earnings into the benefits reserve fund instead of using them to bolster the fund used to pay monthly pensions.
When StanCERA's $1 billion investment portfolio slumped in the recession, it served to greatly increase the county's annual pension fund contributions.
Under pressure from the county, StanCERA, in little more than a year, has shifted $81.5 million from the supplemental benefits fund to alleviate the sharp rise in employer pension obligations.
Last month, the retirement board decided to commit all investment earnings to the main pension fund until it's at least 90 percent funded. The pension fund slipped to 71 percent as of June 30, 2009.
StanCERA will consider restoring the supplemental benefits only if the funding level is between 90 percent and 100 percent for three consecutive years.
Michael O'Neal, a former president of the retired employees group, said the siphoning of money from the benefits fund is unfair to retirees. The retired members paid into the pension system during their public service careers and should get a share of the earnings, he said.
"It's like both of us putting money in a bank account and you decide to take all the interest," O'Neal said. "The county says we don't deserve any of the interest. ... We will just have to see what happens in court."
The proposed reallocation would set aside $30.8 million to help StanCERA offset the more than $400 million in investment losses in 2008 and 2009. It would transfer $25 million to replenish the contingency reserve, put aside almost $10.8 million to help offset future employer contributions and take $1 million from the supplemental cost of living allowance to increase funding for the burial allowance.
Bee staff writer Ken Carlson can be reached at firstname.lastname@example.org or 578-2321.