City and City Employees Retirement System Reach Settlement

A settlement was reached in long-running litigation between the city and the San Diego City Employees Retirement System over what "substantially equal" funding of the pension system really means, SDCERS announced Monday.

The City Charter requires the city government and municipal workers to fund their pension plans on a "substantially equal" basis.

City Attorney Jan Goldsmith filed suit three years ago, contending that the clause didn't mean the city had to make up for SDCERS investment losses or actuarial changes. The litigation was designed to save the city tens of millions of dollars through lower annual contributions to the pension system.

According to SDCERS, the terms of the settlement require the City Council to pass an ordinance stating that the city will continue to make contributions the same way it always has. The law would not be amended or repealed without city officials going through the meet-and-confer process with its labor unions first.

SDCERS CEO Mark Hovey said Goldsmith filed the lawsuit in the middle of a major stock market downturn.

"Over all time periods since SDCERS began tracking investment performance, annualized returns have exceeded 8 percent," Hovey said. "Returns above the 7.25 percent actuarially assumed rate of return serve to reduce city costs."

He said the lawsuit could have increased the city's pension deficit if historical performance was maintained.

The City Attorney's Office had no immediate comment.

The City Council had discussed the case in a closed session meeting last Thursday, but no action was reported later. Trial was scheduled to begin next week in Superior Court.

—City News Service