Calpers Threatens San Bernardino Over Pension Debt
In the opening skirmish of a battle over how local governments deal with soaring pension costs, America’s largest public employee retirement system made clear on Friday it would not tolerate a city deciding to miss a payment.
The California Public Employees’ Retirement System (Calpers) told bankrupt San Bernardino it may take legal action to force the city of 210,000 to resume its pension payments. And the $243 billion Calpers even threatened to sever its ties with the city altogether if it continues to be in arrears.
San Bernardino, a city 60 miles east of Los Angeles that has roughly 3,300 of its workers and retired workers in Calpers, has failed to make payments of more than $6 million to the pension system since it declared bankruptcy on August 1.
Calpers, one of the biggest pension funds in the world, serves many Californian cities and counties and has long argued that pension contributions to its fund cannot be suspended, even if a municipal authority is in bankruptcy. The dispute could become a big test case for financially troubled cities and counties in California and other states as they try to curb surging pension costs.
“These payments are required to be made under California law,” Calpers said in an e-mail to Reuters. “If Calpers and the city cannot resolve the missed payments, Calpers will assert its rights and remedies available under applicable law.”
Calpers spokeswoman Amy Norris said in a telephone interview that if the payments were not made and continued to fall due, “we will pursue collection through legal action.”
Ultimately, Norris said Calpers had the right to terminate the city’s pension plan. Any assets already in the city’s pension fund would be placed in a termination pool, “and retirees’ benefits will be reduced.”