Stanislaus County leaders believe granting a major retirement benefit increase that went into effect in 2002 was a mistake, and they now are scaling back benefits through negotiations with unions.
People who now work for the county will keep their lucrative benefits, but recent labor contracts will give newly hired employees the kind of retirements offered before 2002.
The benefit changes won't avert another pension-related county budget mess next year, when the county will be expected to make a sizable contribution to the Stanislaus County Employees' Retirement Association. StanCERA manages an ailing pension fund for the county, as well the pension system of Ceres, the Superior Court and five special districts.
But it should help the county contain its long-term retirement costs, officials said.
The generous benefits were granted at a time when the stock market was enriching StanCERA's investment portfolio; however, the association suffered $400 million in investment losses from 2008 to early 2009. The mistakes of previous forecasts created a false impression that employers had adequately funded the system.
The county's rising cost of supporting the pension system threatens deep cuts to staff and public services.
Two weeks ago, county supervisors approved a contract with the union, which represents 580 Community Services Agency and Health Services Agency employees, that spells out the standard benefit for new hires.
For employees hired after Jan. 1, 2011, it pushes the minimum retirement age from 55 to 61, and includes a pension formula of 2 percent of salary multiplied by the employees' years of service.
To clamp down on pension "spiking," the county is changing the all-important salary factor used in calculating retirement pay. Pensions will be based on the average of the highest three years of salary.
The pensions for current employees usually are based on the final year of salary. It allows those preparing to retire to claim vacation cashouts, car allowances, bonuses and other items to spike their final-year pay, resulting in larger monthly pension checks.
A Bee review last year showed that spiking allowed county managers to enhance their pensions by an average of 22.5 percent, driving up the cost of funding their retirements. Going to a three-year average for salary serves to smooth out the effects of spiking.
Earlier this year, Stanislaus County approved contracts with reduced pension benefits for Sheriff's Department managers and sergeants, deputies working in jails, and district attorney investigators. Current law enforcement personnel will keep benefits allowing them to retire at age 50 with up to 90 percent of salary.
The benefit will be "2-percent-at-50" for those hired after Jan. 1. In other words, a deputy retiring after 30 years' service will get a monthly pension worth about 60 percent of his or her salary. The salary factor will be the average of the highest three years of pay.
Negotiations continue or are pending with seven other unions, including the Stanislaus County Employees Association, which represents public works, clerical and other employees, making up about half the county work force.
Talks are set to begin in November with the Stanislaus County Sworn Deputies Association. The benefit changes also apply to management and non-union employees.
One union official disagreed with reducing the benefits for law enforcement. But given the state of the economy and the county budget, the employee groups are not in a strong bargaining position, he said.
"It's just the pendulum swinging the other direction," said Grant Beard, president of the Stanislaus County Deputy Sheriff's Association, representing custodial deputies. "There was a lot of pressure on the county to change it, and the other groups were onboard with agreeing to the change. It has a lot to do with the economy."
With the reduced benefits, he said, the Sheriff's Department will attract less qualified people when it starts hiring again.
For now, the county doesn't appear concerned about losing employees, because public agencies throughout California are getting retirement concessions from unions.
Rick Robinson, county chief executive officer, said the county's primary goal has been to establish the two-tiered benefit system, while leaving other issues alone, such as a policy of picking up the employee share of retirement contributions for public safety employees.
That benefit alone is expected to cost the county more than $4.5 million this year.
Robinson said the county agreed about five years ago to cover the costs for those employees in exchange for a hold on pay increases. Those pay raises would have served to increase long-term pension costs, he said.
Robinson expects it will be seven to 10 years before the benefit reductions start relieving the county's pension burden.
The county still is obligated to help fund the retirement benefits for current employees and retirees in the StanCERA system, which is little more than 70 percent funded.
In each of the past two years, the county was faced with more than a $20 million increase in its pension system contribution but was able to avert a budget crisis when StanCERA agreed to shift assets from a supplemental benefits fund.
StanCERA has re-allocated most of those reserves and has not promised help for next year, when the county's pension contribution from the general fund could increase by $14.5 million.
"The county has nowhere to go except to reduce staffing levels," said Jim DeMartini, a county supervisor and StanCERA board member. "You are going to see staff reductions, pay cuts and elimination of programs. This next year is really going to be bad."
Bee staff writer Ken Carlson can be reached at firstname.lastname@example.org or 578-2321.