CalPERS Comments on Bankruptcy Ruling

According to CalPERS: “We are disappointed with the judge’s ruling, but CalPERS will continue to participate in the bankruptcy process in good faith. CalPERS will also continue to work with the City of San Bernardino so it can hopefully resolve its financial problems and also deliver promised benefits to their city employees and retirees. However, CalPERS must and will continue to aggressively pursue all past due contributions, resulting interest and penalties owed by the city. These payments are statutorily required and necessary to deliver on the pension benefits promised to San Bernardino employees as a form of deferred compensation. They have worked for and earned these benefits, and CalPERS will uphold its fiduciary duty to deliver a secure retirement to our San Bernardino members.”

The August 28 ruling, by U.S. Bankruptcy Judge Meredith Jury of the U.S. Bankruptcy Court for the Central District of California, starts the bankruptcy process for the southern California city, which filed for bankruptcy in August 2012. Reuters reports that the city needs to negotiate with its creditors and produce a final bankruptcy plan. At issue are the pension and other debt payments, including those to holders of $50 million in pension obligation bonds.

According to the news report, CalPERS contends that since California state law says the pension fund must always be fully paid, even in cases of bankruptcy, the city should give CalPERS priority and pay its obligations in full. CalPERS said in its statement that it is considering its options for appeal.