Title
Chief Administrative Office and Human Resources Department recommending the Board:
1) Find that a public benefit is derived by expanding an opportunity for employee attrition through a voluntary separation monetary incentive to achieve General Fund and other fund savings;
2) Approve an expansion of the Retirement Incentive Plan (Plan) for Fiscal Year (FY) 2025-26 to allow for all eligible applicants to participate in the program beyond the original $2,000,000 cap; and
3) Approve and authorize the Chair to sign a FY 2025-26 Budget Transfer Request to increase Special Department Expense appropriations and decrease Appropriation for Contingency in the Retiree Health Fund by $2,000,000 to provide for additional funding for the Plan, including to cover approved employee separation incentive payments, any employer fees related to setting up the Health Reimbursement Arrangement accounts, and the Patient-Centered Outcomes Research Institute Fee. (4/5 vote required)
FUNDING: Retiree Health Fund.
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DISCUSSION / BACKGROUND
On November 5, 2024, with Legistar file 24-1916, the Board directed staff to explore options for potential General Fund savings. The County has previously used separation incentives, including most recently in 2015, to achieve General Fund savings in an effort to mitigate the need for reductions to the workforce. On April 8, 2025, with Legistar file 25-0654, the Board directed staff to develop a Retirement Incentive Plan.
On September 16, 2025, with Legistar file 25-1498, the Board approved the Retirement Incentive Plan (Plan). The Plan aims to reduce salary and benefits expenditures by offering an opportunity for attrition through a voluntary separation incentive. The Plan in its simplest form provides as follows for those approved participants:
-If the participant retires from County service no later than December 31, 2025, they will receive $2,500 per year of full-time equivalent service, not to exceed $50,000 deposited into a Health Reimbursement Arrangement (HRA) account.
-If the participant retires from County service after December 31, 2025 but no later than June 30, 2026, they will receive $2,000 per year of full-time equivalent service, not to exceed $50,000 deposited into an HRA account.
The Plan is open to County employees, excluding elected officials and extra help, who have at least 5 years of continuous County service, and who are eligible to retire through CalPERS. Approved participants will be required to sign an Agreement and Release of Claims related to their voluntary participation and separation.
Post retirement, participants can request reimbursement of qualified medical expenses and/or medical insurance premiums from the HRA, which in addition to the one-time contribution, accrues investment earnings; participants currently have 30 investment options within the HRA.
The application period was open from 8:00am on Monday, September 29, 2025 until 5:00pm on Friday, October 3, 2025. Applications were accepted on a first-come, first-served basis. Within the application period, 101 employees applied and 95 were determined as eligible for the Plan. Within 30 minutes of the application period opening, 74 employees submitted their applications. Based on the original cap to the Plan approved by the Board, only 47 employees would receive the full amount they are eligible for, and one employee would receive 80% of the amount they are eligible to reach the maximum of $2 million.
The Budget Ad Hoc met to discuss the merits of expanding the program to allow the remaining eligible applicants to participate in the Plan. Due to the large amount of interest within a short period of time in the application window, the Budget Ad Hoc recommends expanding the program and allowing the 48 remaining employees to participate in the Plan along with providing full funding to the one employee that was only going to receive a partial payment. The total amount of payments to HRAs for all 95 eligible employees will total approximately $3.9 million.
In an early analysis, staff estimates the ongoing annual savings to be $1.4 million if each of the 95 positions is backfilled using the same job class of the retiring employee. The ongoing savings estimates are conservative estimates that assume savings from vacant positions being filled at step 3 with Kaiser family insurance and not eligible for longevity or a CalPERS Employer Paid Member Contribution. Staff are working with department heads to determine which positions can be deleted once vacant, if a staff reorganization is necessary, or if the position is required to be filled as it is currently allocated. Further ongoing annual savings could be recognized if positions are deleted or alternately filled.
Contributions to the Health Reimbursement Accounts will come from the Retiree Health Fund, not from the General Fund. Therefore, a budget transfer is needed to increase appropriations and decrease contingency in the Retiree Health Fund by $2,000,000.
ALTERNATIVES
The Board could choose to not approve an expansion to the separation incentive.
PRIOR BOARD ACTION
09/16/2025 Legistar file 25-1498: Board approved the Retirement Incentive Plan.
04/08/2025 Legistar file 25-0654: Board directed staff to develop a Retirement Incentive Plan.
11/05/2024 Legistar file 24-1916: Board directed staff to explore options for potential General Fund savings.
06/02/2015 Legistar file 15-0640: Board most recently adopted an early separation incentive program.
OTHER DEPARTMENT / AGENCY INVOLVEMENT
N/A
FINANCIAL IMPACT
The Fiscal Impact will be determined based on the final calculation of years of service for employees approved to participate in the Plan but is currently estimated at $3.9 million. This is not a General Fund cost. The Retiree Health Fund is a limited use fund for the purpose of funding contributions towards eligible retirees’ health insurance costs. If the entire $3.9 million is expended for the Plan, the Retiree Health Fund would still have a fund balance of approximately $6 million.
CLERK OF THE BOARD FOLLOW UP ACTIONS
Obtain Chair signature on the Budget Transfer and return to the Chief Administrative Office.
STRATEGIC PLAN COMPONENT
N/A
CONTACT
Sue Hennike, Interim Chief Administrative Officer
Joseph Carruesco, Director of Human Resources