- Data from El Paso County Retirement Plan
That’s why Fowler and several other retirees who showed up at the El Paso County Retirement Plan board meeting on Nov. 27 are asking for either a one-time extra payment or a cost of living adjustment (COLA), or both.
“You know how the economy is going,” she told the board. “We did our time, and we worked hard. If you could do a half check, if you don’t feel it in your heart for a full check, we would all be grateful.”
A retiree receiving the average
benefit of $18,656 a year would receive $1,555 before taxes if the board approves the one-time payment.
The board will consider the request during a special meeting on Dec. 11, and based on supportive comments from board members, the outlook is good for approval.
As board chair County Treasurer Mark Lowderman said, “I don’t think we leave our retirees in the dust.”
But the one-time payment would cost the plan roughly $2.4 million. While that’s less than 1 percent of the fund’s total assets, the payment could eat away at a struggling plan that has only two-thirds of the cash required to meet its obligations over time.
The retirement plan covers 4,631 people who retired from or are working for the county, El Paso County Public Health, Pikes Peak Library District, the 4th Judicial District Attorney’s Office and the retirement plan itself. Of those, 1,455 are retired, and new hires continue to be added to the plan.
The plan is funded by contributions from employees of 8 percent of their salary with another 8 percent of their salaries chipped in by taxpayers of those entities. (Employees also pay Social Security taxes.)
The plan is what’s commonly called a defined benefit plan, meaning it pays retirees predetermined amounts regardless of the fund’s overall financial performance. Defined benefit plans have fallen out of favor over the years because of the difficulty in meeting obligations. Defined contribution plans — those to which retirees contribute a defined amount with no guarantee of a specific benefit upon retirement — have increased in popularity as employers have shifted the risk to workers.
The best example of a troubled defined benefit plan in Colorado is the $47.2 billion Public Employees Retirement Association, which covers nearly 600,000 current and former teachers, judges, highway patrol troopers and city and state workers, including city of Colorado Springs and Colorado Springs Utilities employees. PERA reported an unfunded liability of $32.2 billion earlier this year and a funding ratio of 58 percent, according to media reports.
The El Paso County plan is in better shape, but is still wobbly. Its funding ratio sits at about 70.2 percent, and the fund faces an unfunded liability of $152 million.
The biggest reason for the low funding ratio stems from the recession of late 2008 and 2009. While the fund reported a funding ratio of 91.4 percent in 2008 when it had assets of $285.7 million, the ratio dropped to 75.4 percent the next year when the fund lost $36 million due to value drops in its investments. It slid to its lowest ratio in 2013, at 67.2 percent, due to performance of its investments.
“We just took a beating almost overnight,” Lowderman tells the Independent. “It decimated our funding status.”
(The plan’s assets currently are invested in a variety of mutual funds, hedge funds and real estate investment trusts, although it owns no local real estate, which in the 1990s led the plan into its biggest controversy when administrator and consultant Mike Witty stole hundreds of thousands of dollars via local real estate deals. Witty went to prison.)
To help offset the recent funding ratio declines, contributions made by employees and employers were increased in 2010 to 6.5 percent from 6 percent. In the subsequent four years, three increases brought the level to 8 percent of salaries contributed by employees and employers, for a total of 16 percent. The fund’s latest actuarial report as of Dec. 31, 2016, states the funding ratio should be 16.4 percent to meet the plan’s obligations, but plan administrator Thomas Pfeifle says there are no plans in the immediate future to raise contributions again.
Pfeifle says that while the increasing life expectancy of retirees adds to the plan’s funding ratio shortfall, the biggest culprit is the failure of employers to contribute adequate amounts in past years.
Lowderman says the plan used to give COLAs of 10 percent per year in the mid 1980s, but those were cut to 3 to 5 percent from 1986 to 2001. The last COLA — just 2 percent — was given in 2005. One-time bonus checks have been given in 1995, 2004, 2006 and 2007.
Since then, retirees haven’t received either a COLA or a bonus payment. That’s why they’re struggling to make ends meet, they told plan board members. One woman who spoke to the board but didn’t give her name said she retired in 2002 and has had trouble with escalating living expenses, such as her homeowners association dues that have increased from $125 to $200 a month.
“If I could get an extra month’s salary, it would help so much,” she says. “Things have changed since 2002. Everything has gone up.”
Sheriff Bill Elder spoke on retirees’ behalf, saying, “They’ve all put in their dues. They’ve all spent their time serving the county well. These employees, they live for this retirement. They put their lives on the line for the county, for the community, for the taxpayers. All they ask is they be remembered when it comes time to adjust their salaries.”
Elder noted he wasn’t lobbying on his own behalf, because he’s not vested in the plan, though he used to be. After leaving the county in the late 1990s after 19 years on the job, he cashed out, which he called a “really stupid” decision.
Elder took office as sheriff on Dec. 31, 2014, and won’t be vested unless he’s re-elected in 2018 to a second four-year term. Employees hired before 2013 are vested — meaning they are entitled to a retirement benefit — after five years of service, while those hired after Dec. 31, 2012, are vested after eight years.
Some board members seemed amenable to the bonus payment, especially since the fund has shown a gain of 11 to 12 percent this year, which translates to about $31 million through October.
“Being on a fixed income certainly is no fun,” board member Michael Pennica said. “I have no problem supporting a one-time check.”
But they balked at a COLA without more study, because it would cost the fund more year over year. However, the board agreed to consider a COLA in 2018 after a new report is completed that spells out its obligations to retirees over the long term.
“Seventy percent isn’t exactly a strongly funded plan,” board member Chris Long, a financial planner appointed to the board by county commissioners, said. “We have a fiduciary duty to you and those retiring in the future.”
And Ray Bernier, a sheriff’s employee elected to the board by employees, reminded the retirees that “2008 really hit us hard, and so we’ve got to make sure that, not just for you, but those coming up in the upcoming years will have the same benefits. We have to make sure the fund is viable.”