San Diego Fund's Correction Plan Includes Some Benefit Halts

December 24, 2007 ( - The board of the city of San Diego City Employees' Retirement System (SDCERS) has adopted a 14-point plan negotiated with the Internal Revenue Service (IRS) to bring it into compliance with federal tax law.

The San Diego Union-Tribune reports key changes within the plan include the retroactive elimination of the controversial retirement benefit given to current and past municipal union presidents and the halt of a program that allowed members of the city firefighters union to convert their annual leave to service credits. The IRS said SDCERS must correct those and 12 other breaches of tax law listed in the “compliance statement” within 150 days, the news report said.

The IRS did not require additional contributions to the fund, issue a fine, or revoke the retirement system’s tax-exempt status.

“I’d suggest that what we have in front of us is an extraordinary milestone in the public sector and will be used as a road map for how not to administer your (retirement) plan,” said board member Peter Preovolos, who presided over the board when the system entered the voluntary IRS compliance program in 2005, according to the Union-Tribune.

City Attorney Michael Aguirre was not completely satisfied with the compliance statement, saying it does not undo the decisions that led to the pension fund’s $1 billion deficit. Aguirre has been battling the pension system since 2005, claiming board members accepted increased benefits from the plan in exchange for decreased contributions into the system. He has been attempting to roll back these benefits (See San Diego Illegal Pension Challenge too Late: Judge ).