COUNTY OF SAN MATEO

Inter-Departmental Correspondence

County Counsel

 

DATE:

August 3, 2004

BOARD MEETING DATE:

August 31, 2004

 

TO:

Honorable Board of Supervisors

FROM:

Thomas F. Casey III, County Counsel

SUBJECT:

Adoption of A Replacement Benefits Plan In Accordance With Federal and State Tax Laws

 

Recommendation

Adopt a resolution that (1) adopts a Replacement Benefits Plan; (2) approves a Memorandum of Understanding (“MOU”) between the County of San Mateo and the San Mateo County Employees’ Retirement Association (“SamCERA”) regarding the operation of the Plan and authorizes the County Manager to enter into this MOU; (3) delegates the administration of the Plan to the County Controller; and (4) authorizes the County Manager to enter into an MOU with any special District that participates in SamCERA.

 

Background

County employees’ pensions are calculated in accordance with a formula set forth in the County Employees Retirement Law ( “CERL”). Part of the formula consists of the employee’s age, years of service and final average salary. Federal and state tax laws limit the amount of retirement benefits that can be paid by SamCERA, which is a tax-qualified retirement plan. If the statutorily required pension amount exceeds the tax limit, the Federal tax laws authorize the County to replace these benefits with a non-qualified plan. CERL requires that the County provide such a replacement benefits program.

Discussion

By adopting the Replacement Benefits Plan submitted for your approval, the County will ensure that all employees are treated equally and receive the benefits they are entitled to under the benefit formulas as set forth in CERL. Because CERL requires such a replacement benefit program, seven CERL counties have already established such a program and several other counties are in the process.

 

SamCERA’s actuary has advised that the adoption of the Replacement Benefits Plan is not expected to increase the total County contributions toward employee retirement benefits over the amount previous projected.

 

For efficient operation, the County should coordinate with SamCERA, and the proposed Memorandum of Understanding with SamCERA provides for such coordination. Also, for efficiency, the County may allow a special district, such as the Mosquito Abatement District, a SamCERA participant, to also take part in the plan, as long as the district pays its own costs. The MOU authorizes this participation.

 

Vision Alignment

Government decisions are based on careful consideration of future impact, rather than temporary relief or immediate gain.

 

Fiscal Impact

The adoption of the Replacement Benefits Plan is not expected to increase the total County contributions toward employee retirement benefits over the amount previous projected.