San Diego County Sues Pension for Not Cutting Benefits

Retirement association says enacting lower tier of benefits would be illegal.

San Diego County has filed a lawsuit against the San Diego County Employees Retirement Association (SDCERA) for refusing to implement a county plan to lower pension benefits for new plan participants.

The county is asking a superior court judge to force the pension board to approve what is known as Tier D, which would be a new subset of the pension plan that would offer less generous benefits than the currently used tier C. The creation of the new tier is intended to reduce future pension liabilities.  Under Tier D, non-safety employees hired on or after July 1, 2018, would receive a pension amounting to 1.62% of their final annual salary for every year of county employment upon retirement, which is below that of tier C, which pays 2.3% per year.

According to court documents, the association’s CEO, David Wescoe, said in a letter to San Diego County Supervisor Kristin Gaspar last month that the retirement association’s board of retirement had voted not to implement Tier D for employees hired on or after July 1, 2013.

The county and the retirement association are in dispute over whether or not the state’s legislature has already approved the Tier D defined pension benefit formula. The county contends that the legislature approved the formula as part of legislation enacted in 2006, and has requested a permanent injunction requiring the retirement associate to implement Tier D.

“Despite the fact that the legislature authorized counties to use the formula, SDCERA has refused to implement Tier D,” the county said in the lawsuit. “SDCERA wrongly contends that the 2006 legislation approving the use of Tier D is somehow inapplicable.”

However, the retirement system argues that because Tier D’s defined benefit formula was adopted after Jan. 1, 2013, it does not conform to The California Public Employees’ Pension Reform Act of 2013 (PEPRA).

“PEPRA’s plain language requires that the county obtain legislative approval of the new tier D defined benefit formula,” said the San Diego County Employees Retirement Association in a release. “SDCERA has sought the opinions of experienced independent legal and fiduciary counsel and legislative consultants who worked on PEPRA, all of whom agree with SDCERA’s interpretation of PEPRA’s requirements.”

The county also argues in the court filing that the reduced retirement benefits were approved as part of agreements with its unions during collective bargaining sessions last year.

“Various labor organizations have entered into binding agreements with the County in which they agreed to accept the Tier D formula for new employees in exchange for significant wage and benefit increases,” said the lawsuit.

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