City Settles 'Substantially Equal' Lawsuit

By Wendy Fry and Greg Bledsoe
|  Monday, Nov 25, 2013  |  Updated 7:31 PM PDT
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San Diego City Employees Retirement System announced Monday that a lawsuit over the city's pension plan has been settled. The lawsuit started in 2010 and has cost the city millions of dollars in legal fees. NBC 7’s Greg Bledsoe reports.

San Diego City Employees Retirement System announced Monday that a lawsuit over the city's pension plan has been settled. The lawsuit started in 2010 and has cost the city millions of dollars in legal fees. NBC 7’s Greg Bledsoe reports.

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After millions of dollars in legal fees, heated council meetings and several years of protests by city laborers, the upshot of a big city pension case all comes down to this:

Nothing much is going to change.

The three-year legal battle over the "substantially equal" clause of the city's pension plan has ended with the city agreeing not to require employees to pay a higher contribution amount.

The city council voted 8-1 in closed session on Thursday to settle the lawsuit, which marks the first time in nearly a decade that there will not be ongoing litigation involving the city's pension system.

City Attorney Jan Goldsmith's lawsuit involved the expected earnings of the city's pension investments. When those expected earnings fall short, Goldsmith wanted city employees to split the losses with the city and taxpayers.

Attorney Ann Smith, who represents the employees, said the more than 20,000 active and retired employees affected already pay into the losses with adjustments to the amounts they contribute their pensions, and she pointed out that they do not reap the benefits when earnings exceed expectations.

Smith said the settlement is a big win for the city's employees.

"We have succeeded in stopping it and in leaving the 60 years of pension plan history alone and allowing the contributions to go on as they have in the past without new economic burdens. So, it's very good news for represented employees," Smith said.

Goldsmith said he respects the council's vote, but if they had not decided to settle he would have seen the case all the way through to trial.

"From a legal standpoint, we're right," Goldsmith said. "You can't be required by the pension board to pay more than a substantially equal amount of the employees. Once the council made the decision that they'll voluntarily assume it, the city is no longer being required to do it."

Those who manage the city's pension system believe that if leaders were to divide up the gains and losses over six or seven decades, the employees would be owed money. Goldsmith introduced his lawsuit in 2010 right after a huge $800 million loss in the investment market and as a strategy to making the 401k-style plan more desirable to city employees.

The board of the San Diego City Employees Retirement System voted to accept the settlement agreement Monday.

“Since inception, SDCERS has been confident in its position,” stated Board President Ed Kitrosser. “The City spent more than $4 million suing itself at an interest rate of 7.25 percent over an interpretation of the City Charter that was ultimately left to stand. The City is obligated to pay for SDCERS’ legal expenses through operating costs that are bundled into the City’s annual pension payment, also known as the Annual Required Contribution (ARC). I commend the City Council for ending this wasteful spending so that the City and SDCERS can move forward.”

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