US - The San Diego City Attorney has filed a case against the city employees' retirement system (SDCERS) over the funding of service credit agreements.
SDCERS was designed to allow employees to buy credit for up to five years of unearned contributions, increasing pension benefits.
However, as the price of these credits was set too low before 2003, costs did not meet liabilities, leading to a deficit of US$146m. Last week, SCDERS voted unanimously to honour the agreements and force the city to pay the amount.
For accounting purposes, the shortfall was included in the system’s unfunded actuarial liability and was expected to be funded through the annual required contribution payments made by the plan’s sponsors.
The lawsuit aims to end this practise and the city has already barred new employees from entering into it.
Thomas Hebrank, president of the SDCERS Board of Administration, said: “We have considered carefully every available legal option based upon the facts presented to us, and we believe this is the most prudent and responsible action to take under the totality of the circumstances.”
Global Pensions has previously reported on a Securities and Exchange Commission fraud investigation into the payment by SDCERS of over $8m of benefits to over 100 scheme members, including several ex-trustees.
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