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County of San Diego v. SDCERA (Re: Tier D Implementation)

On April 17, 2018, the County of San Diego filed a Complaint for Declaratory Relief and Petition for Writ of Mandate against SDCERA concerning the implementation of Tier D, the County's new defined benefit formula that will apply to new non-safety employees hired on or after July 1, 2018.

The issue is straightforward. The California Public Employees' Pension Reform Act of 2013 (PEPRA) requires that:

  • if the employer [the County of San Diego] adopts a new defined benefit formula on or after January 1, 2013, that formula must conform to the requirements of this article OR must be determined and certified by the retirement system's chief actuary and the retirement board to have no greater risk and no greater cost to the employer than the defined benefit formula required by this article AND must be approved by the Legislature.” (Government Code Section 7522.02(d), emphasis added)

Tier D was adopted after January 1, 2013, and its defined benefit formula does not conform to the requirements of PEPRA because the retirement age factors in Tier D are different from PEPRA's. (For example, Tier D's retirement age factor at age 65 is 1.62%, while PEPRA's is 2.30%.)

Therefore, the County must do two things.

First, Tier D's new defined benefit formula:

  • must be determined and certified by the retirement system's chief actuary and the retirement board to have no greater risk and no greater cost to the employer than the defined benefit formula required by this article.”

This has been done. On December 4, 2017, Segal Consulting, SDCERA's independent actuary, determined and certified that the new Tier D defined benefit formula would “have no greater risk and no greater cost to the employer.” On December 14, 2017, SDCERA's Board of Retirement unanimously voted to accept and adopt Segal's certification.

Second, Tier D's new defined benefit formula “must be approved by the [California] Legislature.”

This has not been done. The County has not sought legislative approval of the new Tier D defined benefit formula. Instead, the County has elected to file a court action against SDCERA seeking a judicial determination that legislative approval is not required.

PEPRA's plain language requires that the County obtain legislative approval of the new Tier D defined benefit formula. SDCERA has sought the opinions of experienced independent legal and fiduciary counsel and legislative consultants who worked on PEPRA, all of whom agree with SDCERA's interpretation of PEPRA's requirements.

SDCERA has a fiduciary duty to administer the plan according to the law. By requiring the County to satisfy all the requirements of PEPRA prior to implementing Tier D, SDCERA is following its Constitutionally-mandated duty to the plan and its Members and beneficiaries. Failure to do so would violate that duty and jeopardize SDCERA's tax-qualified status. 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.


County of San Diego v. SDCERA

Court Documents

Complaint For Declaratory Relief and Petition for Writ of Mandate, filed April 17, 2018

Plaintiff/Petitioner County of San Diego's Ex Parte Application to set an earlier Hearing Date on Petition for Writ of Mandate, dated
May 1, 2018

Declaration of Thomas D. Bunton in Support of Plaintiff/Petitioner County of San Diego's Ex Parte Application to set an earlier Hearing Date on Petition for Writ of Mandate, dated May 1, 2018

Statement of Non-Opposition of Defendant San Diego County Employees Retirement Association's (SDCERA) to County of San Diego's Ex Parte Application to set an earlier Hearing Date than August 3, 2018 on Petition for Writ of Mandate, dated May 2, 2018

Declaration of David J. Noonan Re Defendant San Diego County Employees Retirement Association's (SDCERA) Statement of Non-Opposition to County of San Diego's Ex Parte Application to set an earlier Hearing Date than August 3, 2018 on Petition for Writ of Mandate, dated May 2, 2018

Minute Order, dated May 3, 2018


Communications Chronology

Email, dated October 5, 2016, from Rachel Witt, Senior Deputy, Office of County Counsel, to Elaine Reagan, SDCERA Chief Legal Officer

Email, dated March 13, 2017, from Rachel Witt, Senior Deputy, Office of County Counsel, to Elaine Reagan, SDCERA Chief Legal Officer

Email, dated March 30, 2017, from Elaine Reagan, SDCERA Chief Legal Officer, to Rachel Witt, Senior Deputy, Office of County Counsel

Email, dated April 3, 2017, from Rachel Witt, Senior Deputy, Office of County Counsel, to Elaine Reagan, SDCERA Chief Legal Officer

Email, dated June 2, 2017, from Elaine Reagan, SDCERA Chief Legal Officer, to Rachel Witt, Senior Deputy, Office of County Counsel

Letter, dated September 14, 2017, from David Wescoe, SDCERA CEO, to Helen N. Robbins-Meyer, County Chief Administrative Officer

Letter, dated March 16, 2018, from David Wescoe, SDCERA CEO, to Supervisor Kristin Gaspar

Letter, dated March 22, 2018, from Thomas E. Montgomery, County Counsel, to David Wescoe, SDCERA CEO

Letter, dated April 2, 2018, from David Wescoe, SDCERA CEO, to County Supervisors

Letter, dated April 12, 2018, from David J. Noonan, Senior Partner, Noonan Lance Boyer & Banach LLP, SDCERA Legal Counsel, to Thomas E. Montgomery, County Counsel

Letter, dated April 13, 2018, from David Wescoe, SDCERA CEO, to County Supervisors

Letter, dated May 9, 2018, from David Wescoe, SDCERA CEO, to County Supervisors