A grand jury in Kern County is asking the county’s retirement pension fund to change.
A
grand jury said in a report released Wednesday that the $ 1.8 billion unfunded
debt at the Kern County Employee Retirement Association would be borne by
taxpayers, and legal scholars said the county would completely change the
system. Recommended to consider.
“Funding
civil servant pensions is not the only challenge for Kern County, but the
current (unfunded pension debt) is not going away anytime soon and is expected
to gradually worsen over the next decade,” the report said. Says. “It should be
noted that California has no obligation to provide assistance to the county, so
nothing should be expected.”
However,
KCERA Secretary-General Domonic Brown said the fund’s overall health is good.
KCERA has an investment of $ 5.1 billion and is projected to be 100% funded by
2035.
“As
long as the plan sponsor continues to contribute to the plan, all this will be
resolved in time,” he said in a telephone interview. “In 2001, we were over
100% funded. We’ll be back again. It just takes time.”
According
to the organization’s website, KCERA has a total of 20,143 members. The program
is attended by several institutions, including Kern County, Kern Medical, and
Kern County Superior Court. It is funded through return on investment and the
contributions of employers and employees.
Pension
benefits are earned by employees when they reach a certain age, depending on
how many years they have worked for the agency. The number of years an employee
has worked multiplied by the final salary is now 1.6% to 2%.
Many
of KCERA’s struggles may be related to the 2002 supervisory committee’s
decision to increase the multiple of public security officials from the legal
maximum of 2% to 3%, according to a grand jury. there is.
“This
retroactive increase may have been the single biggest single factor in why
pension contributions have become an affordable burden for county taxpayers,” the
report said. ..
Since
2002, the fully funded pension plan has become 65% funded. Combined with lower
than expected return on investment, the costs that employers have to pay each
year to maintain the solvent in their systems are increasing.
Unfunded
debt caused a spillover effect throughout Kern County, as money that could have
gone elsewhere was sent to the pension fund. According to the report, the
county expects an increase in pension costs of about 4.4 percent next year.
Kern
County Chief Administrative Officer Ryan Allsop declined to comment on the
story, saying he did not want to anticipate the county’s process of providing
an official response to the report.
However,
despite the negative paintings by the grand jury, KCERA believes the financial
situation is not so dire. Investment has returned about 7.7% over the last
decade, exceeding the target of 7.25% set by fund leaders.
While
the five-year average is around 5.6%, Brown noted the 20% rate of return
experienced by KCERA’s portfolio in 2020. The county has historically lags
behind its peers, but recent efforts to step up investment should bring good
results, he said.
“When
we deal with pension funds, we are often described as battleships rather than
swift ships. Everything is based on 30-year forecasts,” he said. “It’s up 20%
this year, so by the time we get into the 2021 results, the 10-year average
will rise, the 5-year average will rise, and the 1-year average will clearly
rise. Being astronomical.”
As
part of the report, the grand jury set up an extraordinary committee in the
county to consider alternative pension plans and recommended reducing the
multiplier of all employees to about 1.6% by 2024.
The
county must issue a response to the report within 90 days.
California
News Times
Sam Morgen
May 26, 2021
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