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September 23, 2016 01:00 AM

San Francisco controller files injunction against retirement board to stop COLA payments

Meaghan Offerman
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    The city and county of San Francisco and Controller Ben Rosenfield are seeking an injunction on supplemental cost-of-living adjustment payments to certain retirees of the $20.8 billion San Francisco City & County Employees Retirement System.

    In a 2011 referendum, voters approved a requirement that supplemental COLA payments shall only be made if the retirement system was fully funded the previous year.

    Retirees sued and a state appeals court ruled in 2015 that the 2011 requirement did not apply to employees who retired after November 1996, when the supplemental COLA benefits were granted, or to current employees hired before the 2011 requirement took effect. At the same time, however, the court said that the 2011 requirement did apply to pre-1996 retirees because the benefit did not exist at the time. This was upheld by the San Francisco Superior Court.

    However, in July, the pension fund board approved the supplemental COLA payments to pre-1996 retirees, said Mr. Rosenfield in a telephone interview on Friday.

    The board's decision “flies in the face of the courts ruling (on) the matter and would serve to contravene the will of the voters,” Mr. Rosenfield said.

    The plaintiffs argue in court documents that the costs of the board's July decision includes “an estimated $34 million in retroactive payments from SFERS to pre-1996, retirees for the time period since 2012, a drop in the value of the retirement fund of $148 million and an estimated $100 million going forward for the city (without considering the fact that additional COLA amounts will be compounded over time).”

    A hearing will be held Oct. 4 to determine whether an injunction will be issued. In the meantime, the superior court has asked the pension fund to temporarily refrain from issuing the supplemental COLA payments to pre-1996 retirees, and as a result, September supplemental COLA payments have not been made, the pension fund notes on its website.

    “After months of deliberation and meetings … the (SFERS) board determined that the city voters more likely than not intended to treat the two groups of SFERS retirees uniformly so that the burden was shared fairly by all, and did not intend through the adoption of the charter provision … to create two classes of retirees, with the oldest retirees who had suffered most from the effects of long-term inflation having the terms of the supplemental COLA benefit previously granted to them changed such that they were less likely than before to receive that benefit,” the pension fund argued in court documents.

    A retirement official declined to comment further on the litigation.

    The retirement system was 86% funded in 2015.

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