America's most sizeable retirement plan has launched a formal objection to the City of San Bernardino, Calif. and its bankruptcy plan – a plan stemming from the city's inability to pay its mounting public pension costs.
Reuters reports that the California Public Employee Retirement System filed a formal objection Wednesday to San Bernardino's Aug. 1 bankruptcy filing, suggesting the city's finances are in "disarray" and that its pension plan obligations continue nonetheless.
CalPERS stopped receiving payments Aug. 1 and remains the city's biggest creditor. Some $6 million in payments have been missed since then.
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Recently, CalPERS issued statements saying it would not tolerate the growing trend of California cities dropping their pension obligations through bankruptcy proceedings.
CalPERS' filings argue that contributions to the retirement fund cannot be suspended, even in bankruptcy, and that plans regarding a bankruptcy should be set aside until the city can produce detailed financial plans.
"In filing this preliminary objection. the goal of CalPERS is not to start a costly battle over eligibility but rather defer any dispute about eligibility until the City has produced credible projections which could form the basis of a feasible plan," the fund's legal brief stated.
San Bernardino is the first California city to cease payments to the CalPERS system, as well as the first to stand its ground and say it might try to treat the retirement system in the same manner as its other creditors.
The outcome of the dispute could help set a statewide and even national precedent as more and more communities struggle with their overwhelming public pension and retiree health care costs, and seek bankruptcy as a possible solution.
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