The Transportation Authority of Marin is assuming more than $584,000 in unfunded liability for the retirement benefits of nine employees who were formerly the responsibility of a joint powers authority that supplies support staff to government agencies.
In April, the California Public Employees Retirement System, CalPERS, determined that the joint powers authority, Local Government Services Authority, known as LGS, had incorrectly enrolled more than 30 individuals in CalPERS membership. An audit by CalPERS also found that LGS improperly reported service credits and reportable compensation for these members.
The individuals were employed by LGS but worked for Transportation Authority of Marin, Marin Transit Authority, Marin Telecommunications Agency, Marin Emergency Radio Authority, Marin General Services Authority, Metropolitan Transportation Commission and South Bayside Waste Management Authority.
CalPERS decided that affected individuals should have been classified as employees of the agencies they worked for instead of LGS, since LGS “did not control the manner and means” of the work they performed.
Cost estimate
Amy Morgan, a CalPERS spokeswoman, wouldn’t say if the employer contributions made by LGS were less than would have been made had the employees been enrolled in CalPERS by the agencies in which they worked.
Morgan, however, did say, “When a new agency joins CalPERS, a cost estimate is provided that takes into account the demographics of the employer’s members and their assets and liabilities.”
She said as a result, it is likely that the cost estimate for these agencies would have been different than the one provided for LGS.
Dianne Steinhauser, TAM’s executive director, said, “Unfortunately, I can’t weigh in on this, it’s a matter between our board and counsel.”
TAM is represented by county of Marin lawyers. Brian Case, a deputy county counsel, confirmed that on Monday TAM’s board voted to accept CalPERS’ offer to enter into a contract to provide retirement benefits for nine LGS employees.
The TAM board also authorized spending $25,000 to temporarily hire an outside human resources consultant to oversee the transition.
Avoiding conflict
County Counsel stressed in its staff report to the board, “it is in TAM’s best interest to avoid even so much as the appearance of a conflict of interest at any stage in resolving these retirement benefit issues.”
According to the County Counsel’s report, in 2005, LGS signed an agreement with TAM to provide staff services for its executive director position and additional positions were added to the agreement as Tam grew. In 2007, LGS entered into an agreement to provide TAM with staff services, human resources personnel and payroll services on an ongoing basis.
LGS executive director Richard Averett said LGS is appealing the CalPERS ruling, but no timetable has been set for resolving the matter. The result of the appeal won’t have any effect on LGS’s future.
“We decided when CalPERS objected to our model that we would not take on any new clients, and we would work down our commitments to clients until LGS was dissolved,” Averett said. “We now have one client, and it is TAM.”
Averett said LGS was able to relieve small public agencies “of a lot of the administrative set up,” and get them group insurance rates for workers’ compensation insurance “right off the bat.”
Averett is also executive director of another joint powers authority, Regional Government Services, which supplies employees to a host of government entities and public agencies for shorter-term projects. RGS’s clients have included the county of Marin and every municipality in Marin County with the possible exception of San Anselmo. Averett said LGS and RGS were both created in 2001.
No easy solution
In its audit, the Office of Audit Services said it was unable to determine definitively whether LGS and RGS are the same entity or separate entities. Dan Schwarz, the city manager of Larkspur, and Ken Nordhoff, the former city manager of San Rafael who now serves as Walnut Creek’s city manager, serve on the boards of both LGS and RGS.
Nancy Whelan, the Marin Transit District’s general manager, said her board has not yet decided how to respond to the CalPERS audit.
“We are exploring a variety of options right now,” Whelan said.
Whelan said the transit district’s situation is somewhat different from TAM’s because it ended its contract with LGS in 2013, after about three years, and transitioned to a defined benefit pension plan at that time.
Whelan said there is no simple solution to the dilemma since each of its six affected employees have different situations. Some have left the transit district employ. Some want to remain in the CalPERS system, others do not.
Whelan said there is a possibility that the transit district will also decide to assume CalPERS’ unfunded pension liability for some or all of these employees.
Averett said Marin Telecommunications Agency, Marin Emergency Radio Authority and Marin General Services Authority all shared a total of just one or two LGS employees.
Mike Popovich of Larkspur, who happened upon the county counsel’s report while perusing TAM’s website, said, “The bottom line is this went on for 10-plus years, and now we know there is this huge unfunded liability for nine people. It’s crazy.
“Will there be any accountability or does it just sail off into the sunset?” Popovich asked.
