Ten workers and retirees from government agencies in two far corners of California likely will see their pensions slashed because their employers have not paid bills to the state’s largest retirement fund in more than a year.
Trinity County Waterworks District No. 1 west of Redding and Niland Sanitary District from Imperial County are in line to become the third and fourth government agencies to break with CalPERS over the past 12 months in a manner that shortchanges their retirees.
The CalPERS Board of Administration is scheduled next week to vote on ending contracts with the two small districts because they’re in default.
The districts are expected to join the town of Loyalton in Sierra County and an organization called the East San Gabriel Valley Health Consortium as small governments that are falling out of CalPERS because of different financial stresses.
In Trinity, five current and former employees will see their promised pensions slashed by 70 percent. Niland’s five beneficiaries will see a 92 percent to 100 percent cut in pension benefits, according to CalPERS’ staff reports.
To fully fund their workers’ pensions, the two districts would have to muster up hefty termination fees. CalPERS asks for that money up front, and then moves the separating agency to a low-risk fund called the terminated agency pool.
CalPERS says Niland owes about $200,000 to cover the long-term costs of its employees’ pensions in the terminated agency pool, while Trinity owes some $1.6 million. Trinity has asked CalPERS for a 30-year, no-interest payment plan to cover the termination fee, but the district and the pension fund have not reached a deal, according to CalPERS.
More than 1,500 local government agencies are part of CalPERS, the $333 billion pension fund. As a whole, CalPERS has about 68 percent of the assets it would need to pay all of the benefits it owes to its members immediately.
Within the fund, CalPERS tracks accounts for all of its participating agencies. It does not take assets from one city or county to pay benefits to retirees from another.
A new CalPERS financial assessment of its participating agencies shows that 16 of its members are in worse-than-average shape, with less than 60 percent of the assets they’d need to fund full retirements for their employees.
The small organizations that have been failing are in financial straits for different reasons.
The East San Gabriel Valley Health Consortium lost a staple of its work with Los Angeles County and dissolved. Loyalton’s city finances suffered from years of mismanagement.
Niland, although a part of CalPERS since 1995, fell far behind on its pension bills because it did not properly register its employees with the pension fund. CalPERS spotted the problem when one of the workers called the pension fund to ask about his status, according to CalPERS.
Trinity Waterworks is not in financial trouble, its district manager said. It voted to leave CalPERS in 2015 as it shifted its business model to one that relied on a contractor, meaning it did not have new public employees.
It has set aside money for CalPERS, but it does not have the full amount the pension fund wants.
“I’m hoping the story isn’t over,” Trinity’s Craig Hair said.
More small governments could follow the ones that left CalPERS recently.
Three other small departments, including the Herald Fire District near Galt, have filed notices to separate from CalPERS.
The Herald Fire District voted unanimously in January to withdraw from the pension fund, citing a preference to expand its volunteer firefighter program. It’s not clear yet how much money it would have to pay CalPERS to find pensions for five former workers.