The Retirement Board has in the past 18 months made some difficult decisions, but few more troubling than the decision to reduce the pensions of some 121 non-service-eligible disability retirees to the level authorized by Plan documents.  These members who were granted disability retirements after July 1, 2000, had been receiving a 10% Corbett payment due to an administrative error.  This error and overpayment was found by our outside tax attorneys who were reviewing all aspects of the Retirement Plan for compliance with Internal Revenue Service regulations.  The Municipal Code, which provides the legal basis for the Plan does not contain Ordinances or Resolutions which would authorize this 10% increase.

    It was and is crucial that the Plan maintain its tax exempt status, and is in compliance at all times with all IRS rules and regulations.  Loss of the tax exempt status would be catastrophic.  SDCERS must therefore, ensure that all aspects of the Plan administration are in full compliance.  Knowing this, the Board took action to stop the over-payments.

    Since then I, along with others, have been involved in efforts to verify the source of the error and to determine if any remedies were available that would allow restoration of this 10% payment. At SDCERS, I have talked with our interim General Counsel and Administrator who provided extensive technical background on the issue.  Along with other retirees, I met with the Asst. City Attorney to seek solutions.  During attendance at the Pension Trial on Nov. 8, I had the opportunity to hear the examination and cross-examination of David Hopkins, an outside attorney who represented both SDCERS and the City in the Corbett Settlement.  In his testimony he provided numerous details of that Settlement.  And finally, I spoke at length with Michael Conger, the attorney who brought the Corbett litigation and negotiated the Corbett Settlement. 

    Everything I have learned has confirmed that the payments were made in error and there are no administrative remedies available that would allow restoration of the Corbett payments to the non-service eligible disability retirees.

    The source of the initial error appears to be an administrative decision by former SDCERS Administrator Larry Grissom.  When he learned that this group of disability retirees was not covered by the Corbett Settlement, he assumed it to be an oversight, and made the decision to cover this group and make the same 10% payments that were available to service retirees.   His heart was in the right place, but the facts of the case did not support his decision.  No further efforts were made to remedy the perceived oversight.  It was brought to light by the current efforts of our tax consultants.

    The question now arises, "Were these post July 1, 2000 disability retirees left out of the Corbett settlement?"  The answer is, "No, they were not."  They were covered in the same way as other active members who retire after July 1, 2000.  For active employees in 2000, the Corbett Settlement represents a future benefit that does not accrue until that member takes their service retirement.  They do not receive a Corbett benefit until they retire.  For Safety members that is at minimum age of 50.  For General members that age is 55.

    The key point is, that the member must reach retirement in order to receive the 10% Corbett payment.  If, for example, a member dies before they retire, they will not realize any Corbett benefit.  It is only available only on or after a service retirement.  Similarly, those who received a industrial or non-industrial disability before reaching the eligible age for a service retirement do not receive a Corbett benefit.

    It is most unfortunate that an effort to correct a perceived error has resulted in a personal and  negative impact on 121 of our members.  But, an administrative error on the part of an employee or administrator does not change the law.  And that law and Retirement Plan documents do not authorize continuance or restoration of the 10% Corbett payment. With the passage of Proposition B, which requires a vote of the people for any pension benefit improvement and a City Attorney with stated opposition to pension benefits, the likelihood of any action to restore these payments seems extremely remote.

 

 

Note:  If you are in contact with any of the 121 members affected by this action, I would appreciate it if you would forward this message to them.