WATERFALL REVISIONS BEING REVISED
City Council May 27, 2008
Reported by Patricia Karnes

The Waterfall Item330  was continued to June 17th today, as Aguirre said he wanted to do further work on his Version B.

(Early in the meeting, Item 55 about the  Presidential Benefit, was also continued for several weeks, Ron Saathoff and Judy Italiano were not against the continuance. Later in the Council session, Aguirre re-visited that Presidential Benefit item, and if I understood his thinking, said he thought the best resolution was for unions to use meet and confer to consider a lawsuit on the Presidential Benefit.)

SEC Independent Consultant, Stan Keller (Oversight Monitor) reportedly told the Council it will be o.k. to continue the Waterfall issue as long as it is completed by the end of the Fiscal Year. Aguirre said he would call the IRS directly.

The IBA had prepared a report on the two versions being offered up to revise the Waterfall in the Municipal Code. Version A  was drafted by SDCERS and preferred by the IBA and Mr. Keller.  Version B was Aguirre's.

Aguirre's Version B would change benefits.  The IBA requested that the City Attorney opine as to the applicability of affected member needing to vote on any changes, according to requirements of the Charter 143.1a.

CORBETT and 13th CHECK-
The IBA's report noted that Aguirre's Version B would pay the Corbett and the 13th Check without a funding test. An approval vote by a majority of affected members would be needed as this would change benefits. This may increase benefit amounts and require a public vote, as well.

SUPPLEMENTARY COLA-
The IBA also noted that eliminating the Supplemental COLA after 3 years, in 2011, would need an approval vote by a majority of the affected members. Also the IBA had a question if this benefit is vested and asked for an opinion from the City Attorney.

This is from the May 22, 2008 The Waterfall, IBA Report # 08-55:
"Corbett and 13th Check
With regard to these two benefits, the main difference in the versions is that A preserves the contingency of the benefits, while B makes the benefits non-contingent, and payable each year.  This is because Version B eliminates any 'test' to determine if there are funds available to pay the benefit.  Without a test, the benefit is always paid. In Version A, the test has been changed to eliminate any reference surplus earnings, and instead creates an alternate test based upon the amount of investment earnings, less the amount to credit interest to member and plan sponsor contribution accounts and administration expenses.  If earnings remain after this, benefits may be paid from fund assets as specified.

Supplemental Cola
Version A continues the Supplemental COLA reserve and the payment of that benefit. However, the amount in the reserve is ever-decreasing and depending on the benefited population's experience, it is expected that the reserves will be depleted in the future, but likely not for a number of years.

Version B discontinues the reserve but continues the benefit for a period of three years. After this time, the benefit will end and any monies previously attributed to the reserve will simply be retained as part of the trust assets. As described by the City Attorney's Office this enables the funds previously diverted due to the 'surplus earnings' concept be returned to the trust, where it otherwise would have been had the Waterfall not existed.

The IBA wishes to point out that there are currently 954 individuals receiving the Supplemental COLA, for whom this benefit will be eliminated in three years, should Version B be approved.  In addition to noting this impact on retirees, the IBA questions whether or not the Supplemental COLA is a vested benefit that, until the funding is completley depleted, could not be rescinded.  The IBA requests the City Attorney to provide an opinion on this question."