SDCERS, City Settle Substantially Equal Lawsuit

Date: Feb 21, 2014


The San Diego City Employees’ Retirement System's (SDCERS) settlement agreement with the City of San Diego in the Substantially Equal lawsuit was approved by Judge Zimmerman today, marking the first time in more than a decade that there is no open litigation between SDCERS and the City.

“SDCERS will continue to allocate 100 percent of any investment gains and losses to the City,” stated SDCERS CEO Mark Hovey. “I commend the City Council and City Attorney Jan Goldsmith for working with SDCERS and case interveners to reach compromise so that all parties can move forward.”

Under the terms of the settlement agreement—found to be in good faith by the Court—SDCERS’ decades-long application of the "substantially equal" language of the City Charter remains unchanged. Per the terms of the settlement, the City is required to enact an ordinance ratifying SDCERS’ past, current and future allocations of the Unfunded Actuarial Liability (UAL). The ordinance cannot be amended or repealed unless the City and its bargaining units first comply with the meet-and-confer provisions of the Meyers-Milias-Brown Act.

The focal point of the lawsuit was SDCERS’ interpretation of City Charter section 143. The section requires financial liabilities, accruing because of past service of the employees, to be excluded from the substantially equal share of pension costs shared between the City and its employees. SDCERS, the City's pension administrator, requires annual contributions from the City and its workers in order to pay current and future retiree benefits. The City, however, maintained that the substantially equal requirement applied to actuarial and investment gains and losses in addition to the normal cost of normal retirement allowances. For more than 70 years, City leadership and SDCERS have interpreted the Charter section to exclude actuarial and investment gains and losses. Virtually all public pension plans allocate responsibility for actuarial gains and losses to the plan sponsor -- a widely accepted characteristic of public sector defined benefit plans.

SDCERS administers defined benefit plans for the City of San Diego, the San Diego Unified Port District, and the San Diego County Regional Airport Authority and provides service retirement, disability retirement, death and survivor benefits to more than 20,450 members. As of September 30, 2013, SDCERS had approximately $6.3 billion in net investments.

To read the tentative ruling, click here. To read a copy of the settlement, click here. To read the Notice of Entry of Judgment, click here. To read the Granted Judgment of Settlement Agreement, click here.

Historical Substantially Equal litigation documents are available to the public here.

Document Under Categories: Litigation, Press Release