Calpers Seeks to Sue San Bernardino Over Pension Payments
By Steven Church – Nov 28, 2012 10:03 AM ET
The California Public Employees’ Retirement System is seeking to sue bankrupt San Bernardino, California, over missed pension payments, arguing that federal law doesn’t protect the city from the state agency.
San Bernardino failed to make at least $5 million in pension payments and has an unfunded liability of about $143 million, according to court papers filed by Calpers, as the agency is known.
“If participants in the Calpers system fail to timely make payments, then Calpers will be unable to provide an actuarially sound retirement system,” the pension fund said in a filing yesterday in U.S. Bankruptcy Court in Riverside, California.
In August, San Bernardino became the third California city to file bankruptcy in less than three months. The city of more than 200,000 people lies about 60 miles (97 kilometers) east of Los Angeles. A fiscal emergency, brought on by a $46 million budget shortfall, forced it to stop paying some creditors and seek court protection, the city said.
In its filing, Calpers repeated arguments it made previously in the bankruptcies of both San Bernardino and Stockton, California. The pension fund said it should should be given priority over other creditors, a claim that may be tested for the first time in San Bernardino’s case.
San Bernardino filed for bankruptcy under Chapter 9 of the U.S. Bankruptcy Code, which is reserved for governmental agencies. Companies use Chapter 11, which allows them to cancel pensions, often shifting the burden to the Pension Benefit Guaranty Corp., a federal corporation.
The case is In re San Bernardino, 12-28006, U.S. Bankruptcy Court, Central District of California (Riverside).
To contact the reporter on this story: Steven Church in Wilmington, Delaware atschurch3@bloomberg.net
To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net
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