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Retirement board proposes lowering employee vesting from 8 to 5 years; actuary says fiscal impact is minor
Summary
Arapahoe County retirement staff proposed lowering the defined‑benefit plan vesting period for members hired on/after July 1, 2010 from eight years to five, and actuaries said the fiscal impact would be very small.
The Arapahoe County Retirement Board and actuaries on Jan. 14 proposed lowering the vesting requirement for defined‑benefit plan members hired on or after July 1, 2010 from eight years to five years.
Actuary Christy Kiesel and colleague Dana (actuary) explained the proposal and the cost dynamics. They said the relationship between the cash refund and the accrued lifetime annuity has shifted over time: current members contribute 9% of pay and the benefit multiplier is 1.85% of final average pay, so for many employees with short tenures the refund of contributions (with interest) is more valuable than the deferred annuity.
As a result, the actuary said, giving employees who have 5–8 years of service the option to retain their account for a lifetime annuity would have little expected cost in most cases; in many cases the plan is actuarially better off when members leave money in the fund. The actuary described one example (hire at 35, leave at 40) where the plan would retain assets substantially in excess of the liability created by an eventual annuity payment. The slides showed the net present liability change for the plan would be about $20,000 on existing accrued service and that ongoing normal costs would increase by roughly 0.01% of payroll.
Retirement administrators and county staff emphasized other non‑financial benefits: 5‑year vesting is a common practice in peer public‑sector plans and may improve recruiting for both younger employees and those who judge an eight‑year horizon to be a barrier. Commissioners and the treasurer discussed timing and implementation; legal counsel said a plan amendment is required and could be made effective July 1, 2025 if the board so directs.
Board members asked for follow‑up on implementation steps and a timeline; staff suggested preparing a formal plan amendment for consideration and noted the change could be included in the routine year‑end amendment process. No final board action was recorded at the study session; retirement staff said they would return with formal amendment language and timing options.
