The Orange County Employees Retirement System Board of Retirement is poised to once again to raise employer pension costs for safety employee pensions.
Their actuary is to blame.
Unfortunately, pointing fingers won’t help county taxpayers who will continue to pay the highest retirement contribution rates in the county for their public safety employees; more than twice the contribution rates of many Orange County cities.
This is unacceptable.
Even when it became obvious that safety rates were going to experience such a dramatic increase – 6.43% for law enforcement – Segal Consulting remained silent.
Segal never sounded the alarm bells that something was horribly amiss – even though they later admitted they knew about the issue for nearly a year.
Instead, Segal sent over the valuation for OCERS consider just as they had for the past 11 years.
And let OCERS discover the issue.
Those increases translate into millions of dollars in increased costs for the County of Orange and their contract cities. State law requires counties charge contract cities the actual costs of their contracts, prohibiting them from making a profit or absorbing costs.
This budget bombshell came just days before many City Councils began debating their budgets. And that revelation was not received kindly by cities which are just now beginning to claw their way out of budgetary holes. Now many of those cities will be forced back into those holes.
The Board of Directors approves the annual valuation each year based on assumptions they previously voted to approve. Those assumptions include mortality, salary increases and investment returns and any changes to those assumptions are made with the advice of the actuary.
The OCERS Board was assured by their actuary all along that any cost increases would be minimal and insignificant.
Clearly, that was not the case. And the OCERS Board never had the opportunity to focus the discussion on those increases because they were not informed.
Segal Consulting was a ballerina auditioning for Julliard in the way they danced around the issue at the May 11 OCERS meeting.
There were too many other issues clouding the conversation when the OCERS Board adopted the assumption rate, Segal explained. No one asked to break down the employer contributions by safety and non-safety, Segal justified. In fact, not a single one of Segal’s underlings thought it might have been important to highlight such an increase, Segal rationalized.
But when it came down to it, no one asked.
Not exactly reassuring for someone responsible for advising a 10-member board comprised of largely laypeople on how to oversee a $12.7 billion pension system.
Chuck Packard, the chairman of the OCERS Board of Retirement, told Segal Consulting that he has lost confidence in them.
Other board members shared the same sentiment, questioning Segal’s ability to do their job and second-guessing the actuarial advice Segal provided for the past 11 years. And still others remained baffled on how the OCERS Board was kept in the dark for months.
We at the Association of Orange County Deputy Sheriffs also question Segal’s ability going forward as OCERS’ actuary given not only Segal’s penchant for being less than forthcoming but Segal’s lack of professional acumen to alert their clients of a considerable increase.
It is unacceptable for a hired expert to not disclose to their client something of such significance and then lay the blame at the client’s feet for not inquiring about something they could not possibly know.
Unfortunately, the OCERS Board is no longer in a position to figure out how to avoid those increases; the Board can only decide how the County of Orange and their contract cities will pay for them.
While no one can unring the bell, there are options going forward.
We strongly encourage the OCERS Board of Retirement to vote at their June 15 meeting to phase in the increase over three years to allow some breathing room for the County of Orange and the contract cities to absorb this unexpected and significant cost increase.
And we strongly encourage the Board of Retirement to take a long, hard look at who is advising them on their decisions.
Kimberly Edds is Director of Communications and Public Affairs for The Association of Orange County Deputy Sheriffs.