Thursday, February 9, 2012

Task force will look at Tulare County employees pension plan

Feb. 8, 2012 - Committee to consider ways to cut expenses, respond to market changes; officials say county worker retirement plans in good shape - Written by DAVID CASTELLON

Members of the Tulare County Board of Supervisors and the directors of the Tulare County Employees Retirement Association will form a task force to look at ways to improve the county's retirement system.

Among the issues the informal committee may look at is how to respond if the value of the pension plan's assets drops drastically, said retirement board member Gary Reed.

The Tulare County grand jury urged TCERA in May to take action to reduce expenses to offset the possibility of the value of its assets dropping drastically, forcing the county to increase its contributions to keep the retirement fund afloat.

The grand jury claimed the pension fund's value could decline over the next few years to the point that it might be able to cover only 75.9 percent of its expected future costs.

County Supervisor Steve Worthley said Wednesday during a special joint meeting of the Board of Supervisors and TCERA's board that he believes the grand jury report didn't present an accurate picture of the pension fund's financial health.

The grand jury looked at the market value of TCERA's assets as of June 30, 2010, as the stock market - in which the pension fund is heavily invested - was recovering from the economic crash that began in 2008.

TCERA's investment plan has for years assumed a 7.75 percent return rate on its investments, and from 2004 to 2007, the actual returns were between 9.93 percent and 18.35 percent.

In 2008 — when the crash occurred - the return rate dropped 7.8 percent and, in 2009, dropped again by 20.79 percent.

Since then, the investments have recovered significantly, with gains of 10.29 percent in 2010 and 21.83 percent last year, Worthley noted.

The value of the plan's assets has grown from about $833 million in June 2010 to more than $1 billion now.

"That's why you don't make a decision based on one bad year. You don't take a snapshot in time ... and determine the final outcome," Worthley said. "They took the worst year in the history of our plan."

But Tom Casale of Visalia, a retired teacher who has never been a Tulare County employee, warned the two boards against counting on recent improvements on TCERA's investment returns to continue very long.

"These rates of return are not expected to continue through the decade, according to TCERA's own investment advisers or any economist that I have read," he said.

Casale went on to urge TCERA to follow the grand jury's recommendation to obtain a 10-year projection on investment returns based on "realistic" assumptions.

While TCERA's assets can cover only 90.4 percent of its future retirement payments at their current values — compared to being more than 100 percent prior to the economic crash - Worthley said Tulare County's plan is doing a lot better than those of most other California counties and is building assets despite the economic hits.

He said Fresno County's plan is 73 percent funded, Kern County's is 62.7 percent funded and Merced County's is 59.7 percent funded.

Worthley and others at Wednesday's meeting noted that only 12.55 percent of Tulare County's payroll costs go into its employees' retirement plans, while Kern and Fresno counties pay 38.98 percent and 46.1 percent, respectively.

"We are in a very good position compared to anyone around us," Worthley said.

TCERA board chairman Mike Bennett appointed Reed and Gail Henry to the task force.

Worthley said it's likely he'll be on the task force, too, with fellow Supervisor Phil Cox - also a TCERA board member - but Board of Supervisors Chairman Allen Ishida, who left Wednesday's meeting early, would make that decision.

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