Officials at the $12.6 billion Orange County Employees Retirement System, Santa Ana, Calif., and Orange County Board of Supervisors have 90 days to respond to a grand jury report that, in part, recommends the county study replacing its defined benefit plan with a defined contribution or hybrid plan by January 2017.
The report released Wednesday said the county should “conduct a thorough analysis including the financial impact” of implementing a defined contribution or a hybrid plan, the report said. The report on the county's unfunded pension liability is a follow-up to a 2013-2014 Orange County grand jury inquiry into the unfunded pension liability of the 34 cities in Orange County.
Other recommendations include that the county should oppose OCERS' relaxing any of its actuarial assumptions and that OCERS should reduce the pension plan's unfunded liabilities in order to reach a funded status of 80% from its current level of 70%.
In a written response, OCERS CEO Steve Delaney said the grand jury report also highlighted some of OCERS' actions that “mitigated” concerns with the pension plan's unfunded liability.
These mitigating factors included that the pension plan's unfunded liability is at the median point for public pension funds and the county's unfunded liability has been reduced by about $500 million (11%) since 2012.
“Are there challenges ahead for public pension systems in an era of low market returns? Absolutely,” Mr. Delaney wrote. “With OCERS having grown from just under $4 billion in assets at the turn of the millennium to nearly $13 billion today, it is encouraging to see the grand jury acknowledge the progress being made in ensuring the long-term stability of such an important financial component in the lives of our valued members.”