RIVERSIDE - A pension plan for Riverside County government temporary employees should be scrapped and replaced with Social Security, according to a report to be presented to the Board of Supervisors today.

In a five-page evaluation of the county's 401(a) defined-benefit plan offered to workers in the Temporary Assignment Program -- known as TAP -- the Riverside County Grand Jury identified practices it characterized as detrimental to the temporary employees.

The grand jury, composed of 19 residents selected to serve a yearlong term during which they scrutinize and report on government operations, detailed how the 401(a) plan came about, following the county's decision to initiate TAP in the late 1990s to rein in expenditures going to private sector temporary employment agencies.

According to the report, TAP quickly expanded from 200 employees in 1999 to nearly 2,000 employees less than a decade later. During this period, the Laborers International Union of North America -- representing forensic technicians, nursing assistants, building maintenance workers and others in county government -- complained that TAP employees were earning wages on par

with permanent employees.

In a conciliatory gesture, the county lowered TAP employees' wages 5.5 percent, to a level below what permanent employees are paid for comparable work. However, to make up the loss to temps, the county adopted the 401(a) pension program, which works like Social Security and is implemented in lieu of Social Security, according to the grand jury.

However, only 3.75 percent of a TAP worker's earnings are withheld, compared to 6.2 percent under Social Security. The employer matches the withholding, which in the case of the 401(a) plan, means paying out 3.75 percent in matching funds, according to the grand jury.

The report indicated that by implementing the 401(a) program, the county lowered its tax liabilities and seemingly offset TAP workers' losses from reduced pay.

However, problems arise when temporary workers leave TAP after contributing a few thousand dollars or less to their 401(a) plans. The grand jury said federally approved actuarial formulas and other predetermined criteria built into the pension program often reduce temp workers' lump sum

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to a small percentage of their contributions.

The grand jury used the example of a 24-year-old who earns a total of $35,000 after a few temporary assignments amounting to hundreds of hours.

Using the 401(a) provisions, the temp would have contributed roughly $1,313 to the pension plan. If, for example, the employee obtains a job elsewhere and wants to liquidate the plan, the plan's distribution value would have to be calculated to determine the payout.

According to the report, the formula calls for multiplying total earnings by 2 percent, in this scenario netting $700, which is then multiplied by an actuarial rate of .277, resulting in a lump sum payout of only $194.

If a temp employee's contributions exceed $5,000, then the employee is guaranteed a pension beginning at age 65, just like Social Security, though the payments could be marginal, according to the report.

"Those in their twenties and early thirties actually do not receive the bulk of their contributions," the grand jury wrote. "In essence, the county benefits by not returning their full contribution and also benefits by paying only 3.75 percent to the IRS.

"These monies unjustly enrich the county to the detriment of TAP employees. From their standpoint, it would be better to pay full Social Security at 6.2 percent, that would be added to their federal retirement benefit."

The Service Employees International Union filed a labor grievance in behalf of temporary workers last year, alleging the county had improperly withheld $7 million from workers' paychecks since 2004 in connection with the 401(a) program.

The grand jury stated that SEIU was exploiting confusion over the program to drum up support for organizing temporary workers under the union's banner. However, according to the report, there is "no evidence that unionization of TAP employees serves any useful purpose."

According to the grand jury, the county has not adequately informed TAP workers about how the 401(a) defined benefit plans operate, adding to the controversy.

Public comments on the grand jury report are expected during Tuesday's board meeting.

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