County Audit: OCEA Members Paying For Pension Increase
Posted by: Jubal | 04/04/2008 8:50 AM
OCEA General Manager Nick Berardino was in a very good mood when I called him this morning about doing our Red County Radio Roundtable segment.
He informed me the County of Orange had issued its report on an internal audit of the funding for the much-criticized 2004 OCEA pension increase found that "OCEA members themselves and not Orange County fully and accurately paid for the cost of the pension enhancements."
"This should silence the critics, political opportunists, and those who have been misled," said Nick.
Here's the final report, and following is the text of the audit highlight:
He informed me the County of Orange had issued its report on an internal audit of the funding for the much-criticized 2004 OCEA pension increase found that "OCEA members themselves and not Orange County fully and accurately paid for the cost of the pension enhancements."
"This should silence the critics, political opportunists, and those who have been misled," said Nick.
Here's the final report, and following is the text of the audit highlight:
AUDIT OF THE SOURCE OF FUNDING FOR THE 2004 OCEA PENSION ENHANCEMENTS
Audit No. 2765
(An Audit Oversight Committee Directed Audit)
WHAT WE FOUND?
The Internal Audit Department determined that the Orange County Employees Association (OCEA) members themselves and not Orange County fully and accurately paid for the cost of the pension enhancements (2.7% @ age 55 benefit formula) as agreed upon in their 2004 Memorandum of Understanding for Fiscal Years 2005-06, 2006-07, & 2007-08, totaling $80 million, which included additional employee contributions of $46.4 million (as of February 28, 2008) and health insurance cost savings of $33.6 million.
WHY WE DID THIS AUDIT?
At the request of the Chairman of the Board of Supervisors and the Audit Oversight Committee, we audited the cost allocations for the Orange County Employee Association (OCEA) pension enhancements (the "2.7% at age 55" benefit formula) to determine if member's additional retirement contributions and related health insurance cost savings under the OCEA contracts of 2004 fully covered the cost of the pension enhancements. As requested, we will review these pension cost allocations every three years to ensure accuracy.
WHY IS THIS AUDIT IMPORTANT?
This audit is important because it has a significant financial, County-wide impact. OCEA represents a large number of County employees and our review covered six (6) bargaining units of OCEA. These bargaining units consist of approximately 11,700 employees (or 71% of total County employment). In addition, it is of taxpayer's interest if the OCEA members are covering their pension costs as negotiated, or if County General Fund is paying for their pension enhancements in error. The OCEA bargaining units agreed that the pension enhancement will be without any additional cost to the County; therefore, they will make additional employee contributions to the system.
BACKGROUND & INFORMATION (SEE COMPLETE AUDIT REPORT FOR DETAIL)
On August 24, 2004, the Orange County Board of Supervisors adopted Resolution No. 2004-247 to implement a 2.7% @ age 55 retirement formula for General Members of the Orange County Employees Retirement System (OCERS) retiring on or after July 1, 2005. It is an enhanced retirement plan for the OCERS General Members. Through negotiations with the labor organizations, the bargaining units agreed that pension enhancement will be without any additional cost to the County. In addition, they agreed to make additional employee contributions to the retirement system and health benefit changes (increased co-payments, higher deductible and increased employee payroll deductions). The combination of the additional employee contributions and health insurance cost savings are to cover the annual cost of implementing the enhanced retirement benefits.
CATEGORY:
The 5th Floor
Mr. Ayer registered as a Republican to be electable in an interim election with no incumbents. He did...
For the record, the pension plan is not "paying for itself." The workers are paying for the benefits "themselves."
Good point, Chris. I adjusted the headline accordingly.
Thanks for the correction. :)
When union workers say they are paying for the pensions themselves, they are not considering the unfunded liability portion of the equation, which ultimately is the responsibility of taxpayers. The pensions for public safety are NOT paid by the workers themselves -- this is only so for OCEA members.
I need to clarify a point I made above. The unfunded liability portion will be picked up by Nick's members, but if the financial assumptions don't work out, then taxpayers can still be on the hook.
While accurate in their intention, posters have failed to narrowly read what has been audited -- only the enhancements. It is correct to say the county is on the hook for pensions. The "enhancements" however are paid for by the employee. How will Moorlach spin this is any person's guess since he has juxtaposed the two for so long that everyone thought they were one in the same.