At the Board of Supervisor’s meeting Tuesday newly mintedÂ Fourth District Supervisor Shawn Nelson jumped at the chance to criticize the hybrid pension plan that the county and Orange County Employees Association (OCEA) negotiated last year. In discussing the extension of a contract with a Washington, D.C. law firm representing the county in negotiations with the IRS over the tax implications for employees who choose to opt in to the hybrid plan from their current 2.7% @ 55 plan, Nelson objected to the hourly rate the firm was charging. He was theÂ only memberÂ to vote against extending theÂ contract.Â Nelson went on to suggest that the plan approved in 2009 would cost the county more in the long run. He explained his point to Jennifer Muir this way:
There are some county employees who are fully vested in their pensions and eligible for retirement at age 55, but who stick around at the county until theyâ€™re 60 so they can also receive medical benefits in their golden years.
Nelson says that if those employees opt into the lower tier, they will still get their full retirement benefit, but they wonâ€™t have to keep paying for it. Instead, theyâ€™ll essentially get to opt out of the reverse pick-up, taking home more money each month while the county saves nothing.
Interesting, but I don’t think that is how it is supposed to work. First, the retiree medical benefits, and the pension plan, are two totally different programs and they are not related. If an employee works past 55, they would receive an increasing allowance for medical insurance reaching the maximum allowance at 60. The retirees get this allowance until they become eligible for Medicare.
Second, if an employee were to opt-out of the 2.7 @ 55 plan and choose the hybrid 1.62%Â @ 65Â defined benefitÂ plan that includes a defined contribution plan with a county match of up to 2% of an employees annual compensation their retirement eligibility age is changed to 65, the retiree would receive their 2.7% benefit for only the years they contributed under that plan. All remaining years would be calculatedÂ at the 1.62% rate. If Nelson thinks that the retireeÂ who chose toÂ joinÂ the hybrid plan would get the 2.7% benefit for all years of service he clearly doesn’t understand the plan.
Further, Nelson is confused about the reverse pick-up for the pension upgrade. Once the employee opts out of the 2.7% plan, there is no need for additional reverse pickup contribution. Essentially, the employee terminates their participation in the 2.7% plan and enters a new plan at 1.62%. This is similar to an employee who would have worked for a city with one rate with CalPERS and then joined the county OCERS plan under reciprocity agreements between the two plans.
So here we go, Speed Racer Nelson rushes to judgement on something he knows nothing about and jumps off the reservation in the process. This guy is one piece of work.