“Public Pensions Should Not Follow Private Sector Failures!”

By Mike DeBord, Co-Chair CRCEA Retirement Security Committee

How should California’s government retirement plans be funded? Most are designed to be “fully pre-funded”, but what about “pay-as-you-go” or “partially pre-funded”? The challenges facing future retirees and the taxpayer are described in the various approaches listed below.

Social Security is largely a “pay-as-you-go” program where current workers pay the annual cost of retiree benefits. Any year’s excess income goes into a Trust Fund. But when the cost of the monthly benefits exceeds the income from payroll taxes, the Trust Fund is drawn down to keep the checks going. Social Security reports that the Trust Fund will be fully exhausted by 2034 and without changes would only be able pay 77% of scheduled benefits. With the increase of retirees and fewer American workers in the future, this program faces real funding problems!

Private Sector workers have, over the last 30 years, been losing their defined benefit plans. Companies discontinued their pension plans and some, not all, replaced them with 401(k) plans that were never designed to be a retirement plan. This scheme is woefully underfunded and 58% of private sector workers now have no retirement savings. This “partially pre-funded” approach is a time bomb for future generations and will significantly increase poverty for retirees. It will have severe repercussions for state and local governments that are responsible for providing services to the elderly who won’t be able to support themselves. The taxpayer impact of these short-sighted retirement changes/losses in the private sector will be huge!

Public Sector workers still have defined benefit pensions that are designed to pay lifetime retirement benefits and be “fully pre-funded” (about 70% from investment returns with the remainder from employer and employee contributions). After the 2007-08 financial crisis, the funding levels of defined benefit plans dropped noticeably but are now improving with the economic recovery. But outspoken pension critics jumped on the projected “unfunded liability” of public pensions saying they could total up to $2-$4 trillion nation-wide (using low return rate assumptions in their projections instead of the actual higher rates of public pension systems). They use this “unfunded liability” figure to persuade the public to vote against public pensions.

But the real question is “What is the “equivalent unfunded liability” for the private sector?” What would it take for the private sector to be on par with the public sector with respect to retirement assets? That shortfall is at least $29 trillion—a true U.S. crisis in the making!

So tell me again why we need to change our pre-funded public retirement systems to be more like the staggering failures in the private sector???

 

U.S. Ranks 19th On Retirement Security; California Is Even Worse Off Than The Nation

U.S. Ranks 19th On Retirement Security

California Is Even Worse Off Than The Nation

By Mike DeBord, Co-Chair, CRCEA Retirement Security Committee

First the bad news! According to Natixis Global Asset Management, the U.S. barely ranks in the top 20 countries in terms of overall “Retirement Security”. America has held the lowly 19th rank for 3 straight years, just above Slovenia and behind the United Kingdom, Republic of Korea, Czech Republic, Canada, Iceland and many northern European countries.

In their study, “Quality of Life”, largely measuring well-being of individuals, the U.S. doesn’t even make it to the top 30. Income inequality is a big factor in the Natixis measure of well-being, and John Hailer, President and CEO of Natixis said “that is what sank the U.S.

Now the even more distressing news! The U.C. Berkeley Labor Center, in their research, found that access to workplace retirement plans in California’s private sector is inadequate and declining. Their 3 year study found that only 45% of private sector workers age 25-64 in California work for an employer that even sponsors a retirement plan—much less than the U.S. average of 53%. And within California, only 37% of private sector workers actually participate in their employer-sponsored retirement plan. California also has the nation’s highest poverty rate in the Country at nearly 25%. So clearly, California (the 5th largest economy in the world) is not doing better than the nation on these important issues.

In California, there has been a downward trend in workplace retirement coverage since 1998-2000 when 50% of private sector workers had access. More specifically, access is the worst among low-wage workers who work for firms with less than 100 employees. More than 6.3 million California private sector workers currently do not have access to employer sponsored plans including a disproportionate percentage (64%) of these workers being people of color.

It’s been a generation now since the shift from traditional pensions (defined benefit plans) to mostly self-funded 401(k) savings plans (defined contribution plans) and fewer workers than ever are setting aside what they need for their retirement. Employers aren’t contributing enough to the plans and employees aren’t saving enough (50% of American workers aren’t saving anything for their old age).

Many workers that have undersaved for retirement use the excuse that they’ll work forever. That’s not realistic and not always up to them, said Greg McBride, senior vice president at Bankrate.com. “That’s the point where it can reach a crisis at the household level.” With 10,000 baby boomers turning 65 each day, the U.S. retirement crisis is here and growing rapidly. Sadly, each generation is now projected to retire poorer than the last.

Even with all these facts, “pension reformers” continue their efforts to destroy all remaining public defined benefit plans and the retirement security they provide. If they are successful, the race to the bottom will be realized. America needs to change course and we need to be involved in that change!

Sacramento County Employees’ Retirement System (SCERS) Cost-Of-Living Increase For Retirees Effective April 1, 2015

SACRAMENTO COUNTY EMPLOYEES’ RETIREMENT SYSTEM (SCERS)

COST-OF-LIVING INCREASE FOR RETIREES

EFFECTIVE APRIL 1, 2015

At its meeting on February 18, 2015, the SCERS Retirement Board approved the annual cost-of living adjustments (COLA) to be effective April 1, 2015 for eligible SCERS monthly annuitants.

SCERS’ April 2015 benefit payments will reflect the approved increases as follows:

SCREA-2015-Plan-Insert

For further information on how the COLA was determined, please click on the “Important Notices” link on the SCERS website – www.scers.org – or contact the SCERS office at (916) 874-6060.

New Revision of “A Trainwreck in the Making” Available for Download

Public pensions have been under attack for several years now. Public pensions have traditionally been classified as “defined benefit” plans that provide life-long fixed retirement benefits based on the employees’ final compensation, age and years of service. Many of the public pension plans include a cost-of-living-adjustment (COLA) so retirees’ income can keep up with inflation. Also, many public employees pay into and receive Social Security benefits when they retire.

Over the last 30 years, “private sector” employers have eliminated defined benefit plans for their workers, some replaced with defined contribution plans-primarily the 401(k) plan. There is clearly a pension envy factor that has now developed as the do-it-yourself underfunded 401(k) plans are proving to be a failure while public sector retirees continue to receive a guaranteed stream of retirement income. Some of the concerns identified by those who attack public pensions include the current retirement systems’ funding levels that were impacted by the world-wide 2007-08 financial crisis. Another prime area of concern relates to the “spiking” of pensions by some public employees that resulted in increased pensions at time of retirement.

Governor Brown tried to legislatively correct some of these problems in public pensions and in September 2012 he signed the Public Employees’ Pension Reform Act of 2013 (PEPRA) that took effect on January 1, 2013. PEPRA requirements also apply to all of the counties covered under 1937 Act provisions, like Sacramento County.

The state-wide California Retired County Employees Association (CRCEA) includes all 20 counties that operate under the 1937 Act provisions. One of your SCREA representatives, Mike DeBord, is the Co-Chair of the CRCEA Retirement Security Committee. This committee has researched many topics on retirement security, published papers on these topics, lobbied State legislators, testified at the State Capitol, and made several presentations at both individual county retiree association functions and State-wide association conferences. You may have read some of the articles on retirement security that are being published in County retiree newsletters.

Click Below To Download The “A Train Wreck In The Making” Document (PDF):

SCREA Drops Lawsuit Against County (we lost, they won and it wasn’t fun!)

SCREA DROPS LAWSUIT AGAINST COUNTY

We lost, they won and it wasn’t fun!

By Mike DeBord

The SCREA Board of Directors decided not to appeal a Summary Judgment ruling regarding our lawsuit against the County to retain retiree medical subsidies.   A Federal Judge ruled on September 30, 2013 that there was insufficient evidence that the County intended to provide retiree subsidies in perpetuity.

SCREA had provided the court with significant supporting documentation and many declarations by former County employees.  What we were unable to provide to the court (and the primary reason that we did not appeal the judge’s decision) were Board of Supervisors resolutions or other written communications that clearly documented the County’s intent to provide retiree subsidies in perpetuity (forever).  Employees and retirees had relied on verbal understandings, three decades of past practice, statements by County employees, and “trust”.

We trusted the County and the County let us down!

Our lawsuit wasn’t the first legal action related to the loss of retiree medical subsidies.  Back in 2007, the County eliminated the retiree medical subsidies for employees who retired after June 1, 2007.  But the County refused to bargain this issue with the unions.  Some of the unions then filed charges of unfair labor practices with the Public Employment Relations Board (PERB).  These unions won their case on June 30, 2009.  The County was required to re-instate the retiree subsidies and pay interest (make whole anyone who was impacted by the unlawful change).  The County did so, but only for those members of unions that had filed formal charges against the County.  All of the management, administrative and other unrepresented employees, as well as all of the members of bargaining units that didn’t file formal charges against the County, got nothing.  They received no reinstatement of the retiree subsidies.  This action by the County sent a strong message to the unions, its workforce and to SCREA.

We then met with the Interim County Executive and he refused to allow discussion of this topic and threatened to end the meeting with SCREA representatives if we brought it up again.  When the County subsequently terminated the retiree subsides, SCREA Board members met with our attorney and our attorney requested the opportunity to discuss these issues with County Counsel.  We received no response.  We then drafted a lawsuit related to our retiree subsidies and provided a copy of the lawsuit to County Counsel and asked him again for the opportunity to discuss the matter before we filed it with the court.  Again we received no response.  SCREA then filed the lawsuit.  It is unfortunate that all opportunities to discuss this topic prior to court action were not accommodated.

It is important to note that in 2010, the Management employees felt strongly that it was necessary to unionize and voted overwhelmingly to become an exclusive bargaining unit.  The following year, the Administrative employees also did the same.   These previously unrepresented Management and Administrative employees are now in bargaining units like the other County unions and are now covered by formal labor contracts rather than just trusting the County.

SCREA Board Members have painfully learned in the past few years that long-term “past practice” and “trust” cannot be relied on.  Important policy issues like retiree health and dental subsidies should be reduced to writing in understandable language by the County and distributed to all employees and retirees, and there should to be a formal process to address these kinds of issues.  The County Management and Administrative employees now have that kind of formal process since they became exclusive bargaining units, but SCREA cannot formally bargain on behalf of County retirees.

In the past, we have achieved success by meeting with County officials and Members of the Board of Supervisors, and have presented at the Board of Supervisors meetings when retiree related topics were on the agenda.  On more than one occasion, the Board of Supervisors even voted in favor of our position on retiree issues rather than approving the County Executive’s recommendations. But more recently, as illustrated above, discussions with County officials have become more difficult.

The loss of the retiree health subsidies doesn’t just affect current retirees, it also affects current employees (future retirees), many of whom were hoping we would prevail.  In the end, I think employees, retirees and County all lost something important in the last few years….the element of ”trust”.   I hope that in the future there will be opportunities to re-build the trust between the County and those who work, or have worked, for them.  In the meantime, your SCREA Board will continue to represent all County retirees to the best of our abilities.

Other Related Court Decisions

SCREA wasn’t the only retiree organization to recently get disappointing news regarding legal decisions involving the loss of retiree medical benefits.  The Retired Employee Association of Orange County, on February 13, 2014, lost their appeal on a case involving the elimination of “pooled health premiums”.  After decades of past practice and much supporting evidence, the California Court of Appeals ruled against retirees who had filed suit against San Diego County after the County eliminated blended insurance premiums for retirees under 65 years old, an action that increased retirees’ medical premiums dramatically.

Legal issues in this lawsuit against Orange County had previously been to the California State Supreme Court in 2011 where a unanimous decision had been issued that found that “a county may be bound by an implied contract under California law if there is no legislative prohibition against such arrangements, such as a statue or ordinance”.  Further, the State Supreme Court stated that “a contract is either express or implied”.  In other words, a contract can be formed by either words or conduct.  However, the recent legal rulings show that decades of “past practice” and other supporting evidence do not protect County retirees’ rights regarding the loss of their medical benefits.

Yet another appeal was lost involving Sonoma County retirees – a case similar to Orange County retirees.

Also, a lawsuit was filed and won in Court on behalf of a retired police officer who sued the City of San Diego because it placed a cap on the premiums it would pay on her retiree health benefits.  While the retirees initially won their lawsuit, they recently lost on the City’s appeal to the California Court of Appeals.  A press report in San Diego reads: “Potentially precedent setting ruling opens the door for governments statewide to slash worker benefits”.

Court Files Order Granting County’s “Motion for Summary Judgment” Retiree Health Subsidy Lawsuit Dismissed by Judge

Court Files Order Granting County’s “Motion for Summary Judgment” Retiree Health Subsidy Lawsuit Dismissed by Judge

By Mike DeBord

On September 30, 2013, the Federal Judge who conducted a hearing on the County’s “Motion for Summary Judgment” found in favor of the County and entered a Judgment granting the motion and closing the case.  SCREA has 30 days to file a Notice of Appeal of this judgment and we are working with our attorney to preserve that option.

Click Here To Download & Read Summary Judgement:  LINK

The following provides some key dates and actions related to our lawsuit:

  • February 8, 2011- SCREA filed a lawsuit against the County for violations of contract clauses and violations of equal treatment clauses contained in California and U.S. constitutions.
  • April 1, 2011- County filed a “Motion to Dismiss” the lawsuit.
  • November 21, 2011- Supreme Court of California ruled on a question that had been posed in an appeal for another California county lawsuit: “Whether, as a matter of California law, a California county and its employees can form an implied contract that confers vested rights to health benefits on retired county employees.”  The unanimous decision by the court was “Yes”.
  • March 31, 2012- The Federal Judge denied the County’s “Motion to Dismiss” the lawsuit, citing in part the Supreme Court decision.
  • May 24, 2013 – County filed a “Motion for Summary Judgment” of the lawsuit.
  • September 30, 2013- The same Federal Judge granted County’s “Motion for Summary Judgment”.

The retirees of Sacramento County received health and dental subsidies for more than three decades and now those subsidies are gone for nearly all retirees.  In 1980, when the annual subsidies began on a continuous basis for every year thereafter, the cost of health and dental premiums were relatively low.  As annual health premiums increased by double digit percentages during the most recent decade, these pre-tax health subsidies for retirees became far more valuable.  We know by reading more than 1,000 survey responses that most all of those responding to the SCREA survey indicated that they believed that they were entitled to a health insurance subsidy upon their retirement (as is the case for retirees of the State and many other local jurisdictions).  This belief was shared by front line workers up to the very top management positions in the County and as reported through survey responses, the retiree health subsidies played a role in recruitment, longevity in County service, and job choice decisions to either stay with the County or work for another jurisdiction.  As the County reduced the subsidies and then took actions to eliminate these subsidies in total, many retirees felt betrayed by their former employer.  The financial impact of the subsidy loss was hard felt by our retirees.  After many years of trying to work with the County and the Board of Supervisors to continue the retiree subsidies, in 2011, SCREA filed a lawsuit to try and protect the long standing past practice by the County.  The SCREA Board Directors and our attorney Mark Merin dedicated a tremendous amount of time and energy over the last several years working with County retirees to build our case.  The ruling on the “Summary Judgment” prior to a jury trial was a real disappointment to say the least.

This lawsuit process has demonstrated several things to me.  First, what is “legal” vs. what is “right” are two different things, i.e. legality vs. morality.  As prior career employees, we know much about the dedication, commitment and loyalty we provided to the County and the tremendous value we collectively provided to the community.  The pride and job satisfaction we felt as employees will always reside within each of us.  What the County has done by dropping our subsidies after we retired and the way the County continued to provide health and dental subsidies to some groups of retirees while eliminating it for others is simply not right, even if it is determined by the court not to be a violation of the law.

In closing, whether or not we are successful on the appeal process, I want to thank the SCREA Board of Directors for unanimously voting to take the action of filing and supporting this lawsuit on behalf of all retirees, our attorney Mark Merin for his tremendous effort on this case, the retirees for supporting our effort and especially those who responded to our survey, provided documents, contributed to declarations, and helped us build our case.  The SCREA Board of Directors and membership came together to fight the good fight on behalf of all County retirees, and for that I am very proud.

Court Files Order Granting County’s “Motion for Summary Judgment” Retiree Health Subsidy Lawsuit Dismissed by Judge

By Mike DeBord

On September 30, 2013, the Federal Judge who conducted a hearing on the County’s “Motion for Summary Judgment” found in favor of the County and entered a Judgment granting the motion and closing the case.  SCREA has 30 days to file a Notice of Appeal of this judgment and we are working with our attorney to preserve that option.

Click Here To Download & Read Summary Judgement: LINK

The following provides some key dates and actions related to our lawsuit:

  • February 8, 2011- SCREA filed a lawsuit against the County for violations of contract clauses and violations of equal treatment clauses contained in California and U.S. constitutions.
  • April 1, 2011- County filed a “Motion to Dismiss” the lawsuit.
  • November 21, 2011- Supreme Court of California ruled on a question that had been posed in an appeal for another California county lawsuit: “Whether, as a matter of California law, a California county and its employees can form an implied contract that confers vested rights to health benefits on retired county employees.”  The unanimous decision by the court was “Yes”.
  • March 31, 2012- The Federal Judge denied the County’s “Motion to Dismiss” the lawsuit, citing in part the Supreme Court decision.
  • May 24, 2013 – County filed a “Motion for Summary Judgment” of the lawsuit.
  • September 30, 2013- The same Federal Judge granted County’s “Motion for Summary Judgment”.

The retirees of Sacramento County received health and dental subsidies for more than three decades and now those subsidies are gone for nearly all retirees.  In 1980, when the annual subsidies began on a continuous basis for every year thereafter, the cost of health and dental premiums were relatively low.  As annual health premiums increased by double digit percentages during the most recent decade, these pre-tax health subsidies for retirees became far more valuable.  We know by reading more than 1,000 survey responses that most all of those responding to the SCREA survey indicated that they believed that they were entitled to a health insurance subsidy upon their retirement (as is the case for retirees of the State and many other local jurisdictions).  This belief was shared by front line workers up to the very top management positions in the County and as reported through survey responses, the retiree health subsidies played a role in recruitment, longevity in County service, and job choice decisions to either stay with the County or work for another jurisdiction.  As the County reduced the subsidies and then took actions to eliminate these subsidies in total, many retirees felt betrayed by their former employer.  The financial impact of the subsidy loss was hard felt by our retirees.  After many years of trying to work with the County and the Board of Supervisors to continue the retiree subsidies, in 2011, SCREA filed a lawsuit to try and protect the long standing past practice by the County.  The SCREA Board Directors and our attorney Mark Merin dedicated a tremendous amount of time and energy over the last several years working with County retirees to build our case.  The ruling on the “Summary Judgment” prior to a jury trial was a real disappointment to say the least.

This lawsuit process has demonstrated several things to me.  First, what is “legal” vs. what is “right” are two different things, i.e. legality vs. morality.  As prior career employees, we know much about the dedication, commitment and loyalty we provided to the County and the tremendous value we collectively provided to the community.  The pride and job satisfaction we felt as employees will always reside within each of us.  What the County has done by dropping our subsidies after we retired and the way the County continued to provide health and dental subsidies to some groups of retirees while eliminating it for others is simply not right, even if it is determined by the court not to be a violation of the law.

In closing, whether or not we are successful on the appeal process, I want to thank the SCREA Board of Directors for unanimously voting to take the action of filing and supporting this lawsuit on behalf of all retirees, our attorney Mark Merin for his tremendous effort on this case, the retirees for supporting our effort and especially those who responded to our survey, provided documents, contributed to declarations, and helped us build our case.  The SCREA Board of Directors and membership came together to fight the good fight on behalf of all County retirees, and for that I am very proud.

 

 

SCREA vs. County of Sacramento Litigation Update

On May 24, 2013, the County of Sacramento filed a “Motion for Summary Judgment” with the United States District Court.  A “Summary Judgment” is a procedural device used in civil litigation to promptly and expeditiously dispose of a case without trial when there is no dispute as to the material facts of the case.

Back on April 1, 2011, the County filed a “Motion to Dismiss” in the same court and lost.  The judge denied the County’s “Motion to Dismiss” on March 31, 2012.  The current “Motion for Summary Judgment” by the County is scheduled for a hearing on June 28, 2013 in federal court with Judge Kimberly J. Mueller.  Usually a court will hold oral arguments on a “Summary Judgment” motion, although it may decide the motion on the parties’ briefs and supporting documentation alone.

In response to the County’s “Motion for a Summary Judgment”, Mark Merin, attorney for SCREA, filed several documents in opposition to the County’s statement of undisputed facts and supporting evidence.  Included in SCREA’s response are several written declarations including a declaration by Mark Merin, as well as a prior County Executive, a prior Chief Deputy County Executive, a prior Agency Administrator, a prior Deputy Director, a widow of a Supervising Probation Officer, a prior Board of Director of SCERS, a prior Sheriff’s Captain, and a prior Chief Deputy Sheriff who was on the County’s bargaining team.  Overall, these declarations provide many strong supporting statements why County employees and retirees believed that they were entitled to the continuation of retiree health and dental subsidies.

New Retirement Tiers for Sacramento County Employees Effective 1/1/2013

The Board of Supervisors approved new retirement tiers for Miscellaneous and Safety Members for employees hired on or after January 1, 2013.  In August 2012, the State of California approved the California Public Employees’ Pension Reform Act of 2013 (CalPEPRA).   While the bulk of the new provisions apply to CALPERS, some also apply to counties who are administered under the County Employees Retirement Law of 1937, which includes Sacramento County.  Accordingly, new employees hired by Sacramento County on or after January 1, 2013 will have

  • Reduced benefits formulas
  • Increased retirement ages
  • Caps on compensation that count towards pension benefits
  • No ability to purchase ARC (Additional Retirement Credits)
  • 50/50 cost sharing between employees and the employer

Miscellaneous Employee Retirement Tier V (effective 1/1/2013)

The new formula begins with 1.0% at age 52 and incrementally increases to 2.5% at and after age 67.

Safety Employee Retirement Tier IV (effective 1/1/2013)

The new formula begins with a 2.0% at age 50 and incrementally increases to 2.7% at and after age 57.

Update on the SCREA Blood Donor Club

UPDATE ON THE SCREA BLOOD DONOR CLUB

By Lyn Scotti

The need for blood is constant.  The shelf life of red blood cells is 42 days or less.  Platelets, which are critical to control bleeding, have a lifespan of only 5 days.  Donations to our Donor Club ensure that you and your family, your friends, and everyone in our community has the opportunity to receive this gift of life when they need it.

During the last reported quarter, SCREA Donor Club (No. 6855) received 32 donations.  All-time donations to the club are 2,763.  The SCREA Board thanks all individuals who have donated blood selflessly to SCREA’S Donor Club. The Board feels special recognition should be given to several individuals who have outstanding donation histories:

NAME

UNITS DONATED

Patricia Clark

407

William McCamy

279

Melvory Brown

243

Farris Salamy

218

Carolyn Salamone

176

 

During recent discussions with representatives at Blood Source, it was learned Blood Source has changed the way credits for donations are managed by their organization.  Blood Source still keeps detailed records of all blood donations made to the Club, but they no longer pay attention to the boundaries of club membership regarding usage.  Blood products are “pooled” and Blood Source will provide blood products from the pool (and reimbursement for blood products) to anyone who meets their requirements.  The main requirement to utilize blood products under their control is for the recipient to be transfused at a medical facility located within the geographical region serviced by Blood Source.  That geographical region includes Northern California to the Oregon border, Stockton and Merced.

It was learned Medicare no longer covers the costs of the first (3) units of blood products utilized.  Some insurance plans (all County plans) will cover the first (3) units of blood products used, but many individual insurance plans will not.  This situation is the most frequent reason someone would receive a bill for blood products.

The insurance EOC (Evidence of Coverage) details blood product coverage.  Individuals who lack coverage for the first (3) units of blood products, can request reimbursement from Blood Source by producing a bill for the blood products used, a copy of their receipt verifying they paid for the units, and a copy of the relevant section of the EOC for their insurance plan showing what blood products the insurance does and does not cover.  Costs for incidentals to the process, like needles, bandages, etc. are not reimbursed by Blood Source.

Your donations of blood products to the SCREA Donor Club (No. 6855) are appreciated and will ensure blood is always available when needed by our members and community.   You may telephone Blood Source at (916) 456-1500 to arrange to donate to the club, or to arrange for reimbursement for blood products utilized.