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San Diego County sues pension fund to implement new benefit formula

San Diego County has sued the county pension plan to force it to lower benefits for new, non-safety employees hired on or after July 1.

In a lawsuit filed on April 17 at a California trial court in San Diego, the county wants the court to order the $12.4 billion San Diego County Employees Retirement Association to implement a new benefit formula — called Tier D — without the county first obtaining legislative approval of the formula as required by state law.

Under the new benefit formula adopted by the San Diego County Board of Supervisors on Jan. 9, the pension benefit for non-safety employees hired after July 1 would be based on 1.62% of their final annual salary for every year of county employment, down from 2.3%. The new rate would result in a gradual long-term reduction of the county's contribution rate to 6.02% from 8.27% under the current plan, according to minutes of the pension fund board's Jan. 9 meeting that is attached to the complaint. The new tier is not expected to have an impact on SDCERA's unfunded liability.

The county argues that an earlier 2006 state law preapproved the Tier D formula. SDCERA officials argue that under another state law, the 2013 pension reform act, the state Legislature still has to approve a new formula.

"SDCERA has a fiduciary duty to administer the plan according to the law … By requiring the county to satisfy all the requirements of PEPRA (California Public Employees' Pension Reform Act) prior to implementing Tier D, SDCERA is following its constitutionally mandated duty to the plan and its members and beneficiaries," SDCERA said in a written statement. "SDCERA's fiduciary responsibilities require it to insist upon full compliance with PEPRA before it can lawfully administer Tier D."

SDCERA will respond to the county's complaint and "looks forward to resolution of this issue," according to the statement.