OPINION: SBC’s unfunded CalPERS termination liabilities skyrocket to $226 million

Want to walk away from CalPERS? Get out your wallet.

As of June 30, 2016 all San Benito County employee CalPERS retirement plans had a total asset value of $145 million. The “Hypothetical Termination Liabilities” of those plans were between $341 million and $402 million depending on interest rates.

Note: figures are rounded to the nearest million throughout this article.

Therefore, the county had an unfunded termination liability average (average termination liability minus asset value) of $226 million, a whopping $34 million increase from 2014.

The annual valuation reports show the hypothetical cost of terminating CalPERS contracts – put another way, that is what we would have to pay to cover the obligations already incurred if we wanted to walk away from the program; it’s one measure of fiscal condition. CalPERS publishes a low estimate and a high estimate, I just took the average of the two.

Putting agency profiles together takes some work because CalPERS and the State of California have tried to apply various patches in hopes of staving off collapse or implementing large cost increases. The result is several different employee categories, each with their own retirement system and funding rules.

For example, the City of Hollister has nine separate retirement schemes, three each for Miscellaneous employees, Police and Fire. The vast majority of employees remain in the traditional or classic – and most expensive – system, and will for many years to come.

Those patches have not yet allowed CalPERS or local governments to turn the corner; liabilities – as reflected by the hypothetical unfunded termination estimates – continue to grow at a pace that far exceeds the economic growth rate.

The pattern for the City of Hollister is similar to that of the county, all Hollister employee CalPERS plans had a total asset value of $73 million. The “Hypothetical Termination Liabilities” of those plans were between $180 million and $210 million, depending on interest rates.  Therefore, on average the City of Hollister had an unfunded termination liability of $122 million, a $21 million increase from 2014.

In spite of the fact that SBC and Hollister, together, have more than $218 million of assets at CalPERS it would cost them another $348 million to terminate the agreements.  Like the coal miner in the country classic "Sixteen Tons", our local agencies can't get off the treadmills because they owe their souls to the "company store."


Next time – CalPERS forecasts massive increases in the cost of employer contributions.

Marty Richman

Born and raised in Brooklyn, NY, Marty (Martin G.) spent his teen years in northern New Jersey. He served more than 22 years on active military duty, mostly in Europe, and is a retired U.S. Army Chief Warrant Officer 4, Nuclear Weapons Technical Officer. Marty then worked 25 years in various engineering and management positions in the electronics and energetic materials industries supporting the communications, computer, aerospace, defense and automotive sectors. He is a graduate, summa cum laude, from The College of Hard Knocks, among his numerous awards and accomplishments. He was a regular weekly Op/Ed columnist and feature writer for The Hollister Free Lance for seven years and a member of its editorial board for five years. Marty is a frequent commentator and contributor to BenitoLink on a wide variety of local, state, national and international subjects.   Marty was elected to represent the City of Hollister District 4 on the City Council in November, 2018. Marty and his wife, Joyce, have been residents of Hollister since 1996.