Pension Reform

By Ed Mendel
Monday, May 12, 2014

An Assembly committee last week approved a bill aligning the state law covering 20 county retirement systems with federal tax law, disappointing some who want to bar the use of “excess” investment earnings for retiree health care and other purposes.

The bill said to represent three years of talks mainly between the IRS and the Orange County system, the informal leader in the negotiations, moved out of the Assembly public employees retirement committee with no discussion.

At a regional county pension reform conference in San Rafael Saturday, the failure of the bill to bar the diversion of “excess” earnings was called a disappointment by Mendocino County pension reformers.

An organizer of the conference, John Dickerson, publisher of, and Ted Stephens, now a member of the Mendocino county retirement system board, brought public attention to the diversion of “excess” earnings.

For about 15 years, annual Mendocino pension fund investment earnings in excess of 1 percent of total assets were used to pay for the retiree health care of county employees entitled before 1996, when retiree health care was cut.

The diversion of the investment earnings, which added to the debt or “unfunded liability” of the county pension system, was criticized by a conference panelist, Willits Mayor Holly Madrigal, a candidate for the Mendocino County Board of Supervisors.

“My predecessors on the board of supervisors, they made a commitment and then did nothing to actually fund it,” Madrigal said. “They actually raided the pension funds for that. I don’t believe any of the union members I know would have supported that, if they had been aware of it. But the fact is we have all failed as far as the accountability.”

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