The economic downturn is taking its toll on Arapahoe County’s employee retirement plan. According to an analysis by Mercer, the county’s …
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The economic downturn is taking its toll on Arapahoe County’s
employee retirement plan.
According to an analysis by Mercer, the county’s financial
advice contractor, the pension plan is at a shortfall of $122
million. The funded status of the plan stands at about 57 percent,
compared to 87 percent one year ago.
The firm’s June 16 report to the Arapahoe County Board of
Commissioners says the fund’s shortfall can only be eliminated by
achieving annual asset returns in excess of 7.5 percent, increasing
contribution rates or by reaping gains from unexpected demographic
Commissioner Frank Weddig of Aurora thinks the situation raises
serious issues as to what the county’s budgetary priorities should
“Almost any scenario could mean a very significant increase in
employee-employer contributions to bring the plan to where we’re
told it should be, which is 90 percent funded,” he said. “The
question is, are we ready to put that much of our personnel budget
every year into retirement?”
The Arapahoe County Retirement Board, comprised of staff,
elected officials and citizens, has already taken some action by
decreasing benefits for employees hired after April 1, 2006. Such
workers pay the same contribution rate as longer-serving employees.
The early retirement age was raised from 52 to 55 for the same
“These benefit changes have had a small measurable effect on the
plan, but these changes alone are not enough,” County Treasurer
Doug Milliken recently wrote in memo to the board of
The retirement board has requested that the contribution level
be raised again over the next few years. One proposal is to
increase the level next year from the current 6.5 percent to 7
percent. Additional half-percent increases would kick in in 2012
According to Mercer’s report, the newer employees’ contributions
should be sufficient to cover their eventual pension payments and
can be used to help pay down the shortfall for existing and former
Still, the report says under current assumptions and
contribution rates, the retirement plan can still not be expected
to reach overall “sufficiency” in the next 20 years.
Although no member of the county’s board of commissioners is
taking the sobering analysis lightly, some disagree with a few of
For one, Commissioner Susan Beckman of Littleton doubts the
county will be offering 4.5 percent salary increases any time
“Mercer put worst-case assumptions into something to make it
look much worse than what it is,” she said. “If you look at flat
salaries for a period of time, which is probably more realistic,
the plan probably comes into line.”
Provision changes proposed by Mercer include:
Raising the 100 percent vesting schedule from eight years of
service to 10 years
Raising the county’s retirement age from 65 to 66
Lowering the annual interest rate on contributions from 4
percent to 2 percent
Eliminating the 10-year minimum pay-out, meaning an employee’s
payments would cease upon death
According to the report, if these changes and others were
implemented, the plan’s shortfall would be reduced by between $125
million and $140 million by 2029.
The board of commissioners is expected to continue studying
options for overhauling the pension plan over the next few
Beckman, the board chair, is confident that the county will be
able to maintain a solvent retirement program for its employees in
“The sky isn’t falling,” she said. “The world is changing. There
are some changes we will have to make that we will make. Maybe what
will happen is the commissioners and the retirement board will come
to an agreement. We control the variables. We control the
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