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Chief Administrative Office recommending Board approve the Early Retirement Incentive Program (ERI) and Plan for Fiscal Year 2010-11. (Est. Time: 15 Min.)
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Fiscal Impact/Change to Net County Cost: None from this action however Plan could possibly result in $5 M in annual savings depending upon number of retirements and number of years of service. The cost of the ERI would come from the Retiree Health Fund which had $16 M in cash on 7/13/10. This is the source of funding for 2009/10's ERI offering. The average (RHS) contribution to retiring employees in FY 2009/10 was $35K.
Background: The County is facing a projected $15 M fiscal deficit in FY 2011/12 plus a $1.5 M deficit in the current year (FY 2010/11) due to an additional -2% decline in property tax assessment. The ability to make these levels of reductions will be exceedingly challenging given that the organization has been in continuous downsizing since 2008 and there are primarily only staff costs left to make up that difference. It is critical to begin laying the ground work for dealing with the current year and the future projected deficit now. The Chief Administrative Office believes that by incentivizing at least 70 employees to leave and then restructuring or eliminating their positions that $5 M can be achieved in annualized savings. There are 500 employees over the age of 50 with at least 5 years of service in the County. There are 325 employees over 55 with at least 5 years of service.
Reason for Recommendation:
In September 2009 the Board approved an Administrative Service Agreement with International City Management Association Retirement Corporation (ICMA-RC) to provide for a Retirement Health Savings (RHS) account as a vehicle to offer an Early Retirement Incentive that would incentivize employees within a few years of retirement to leave in order to retain lower cost employees. The RHS is an employer sponsored plan where money can be contributed on a tax-free basis into a dedicated trust for the exclusive purpose of reimbursement of eligible medical expenses. That process resulted in 22 employees retiring and the administrative process has gone very smoothly.
The Board has authorized the CAO to proceed with another ERI offering in preparation of needing to close a projected fiscal gap of at least $15 M in FY 2011/12. The additional deficit of $1.5 M for FY 2010/11 now means action is even more needed. The attached plan outlines the parameters of the proposed ERI Program for FY 2010/11. The major difference from last year is to further incentivize employees to leave early (thus increasing savings in the current year) through the offer of a two part option but to still capture those employees who need to stay until December 31st which is a date that maximizes some retiree benefits. If employees retire by September 30, 2010 they would be eligible for $2,000 per year of County service and if they retired between October 1, 2010 and December 31, 2010 they would be eligible for $1,500 per year of service. The total payout cannot exceed $50,000 under either option. Attachment A: Summary of Plan Provisions provides more specifics of the proposed Plan. The Board would have final authority to approve participation in the Plan.
A meet and confer process has occurred with all the bargaining groups in regards to the development of this proposed plan.
Action to be taken following Board approval: CAO and Human Resources to implement Early Retirement Incentive Program and Plan.
Contact: Gayle Erbe-Hamlin, X5530
Concurrences: Human Resources