SACRAMENTO, Calif. November 16, 2016 – The Board of Administration for the California Public Employees’ Retirement System (CalPERS) today declared the city of Loyalton in default of its obligations to CalPERS after failing to pay what it owes to fund its pension plan. The decision means that Loyalton’s retirees will see their benefits reduced in accordance with California Public Employees’ Retirement Law.
“This is a decision we take very seriously and one we very much regret had to be made,” said Rob Feckner, president of the CalPERS Board. “As a Board, we have a fiduciary responsibility to keep the CalPERS Fund on secure footing, and as part of this duty we must ensure that employers adhere to the contracts they agreed to. When they don’t, the law requires us to act. The people who suffer for this are Loyalton’s public servants who had every right to expect that the city would pay its bill and fulfill the benefit promises it made to them.”
The city of Loyalton voluntarily terminated its contract effective March 2013. In June 2014, CalPERS provided city officials with an invoice for the termination liability in the amount of $1,661,897. CalPERS has had multiple discussions with the city on several important topics, including:
- How the termination process works
- Loyalton’s final valuation and the cost to terminate its contract with CalPERS
- Loyalton’s subsequent request to rescind termination and its desire to establish a new contract with CalPERS to administer its pension plan
Once it was determined that Loyalton could not legally rescind its voluntary termination, a final collections letter was sent on December 15, 2015. After receiving no payment, a final demand letter was sent in August 2016 requiring Loyalton to bring its account current within 30 days or be declared in default.
Subsequent meetings with Loyalton officials failed to lead to a resolution. To date, Loyalton has not made any payments toward its voluntary termination costs. In total, CalPERS has had over 50 telephone calls with Loyalton officials and sent 10 collection notices.
In addition, a certified letter explaining CalPERS’ proposed action to reduce benefits was sent to the four affected retirees and one individual who no longer works for the city but does not yet collect retirement benefits. Under Government Code 20577, the Board can reduce member retirement benefits from the date of contract termination in proportion to the amount of the employer’s deficiency in paying its required contributions. In Loyalton’s case, the reduction could amount to a 60 percent reduction in benefit payments.
Loyalton originally contracted with CalPERS for pension benefits in January 1986. In September 2004, the city amended its contract to provide its employees a retirement benefit formula of 2.7 percent at age 55.
The “city” of Loyalton does not generate enough revenue to pay the calpers fund and to prevent the city from going into further debts and defaults the city needs to be dissolved and go under a “unincorporated” flag and go under county jurisdiction.
I used to work for Sierra County, Ca. which is where the City of Loyalton is from spring 2009 to fall 2010.
The entire county is failing due to lack of foresight and interest in diversifying for growth in business and residential development. Even a general dislike of tourisim in the small dying towns like Loyalton, Sierra City and the county seat Downieville from many long term “old school” small thinking residents. Dare I mention the countys super elite cadre’ of small thinkers sprinkled into which are a very small number of progressive thinkers but are often shot down for their ” big city thinking”. Amazingly just over a mountain range in the Town of Truckee, Ca. where real estate is at a premium, tourisim is a boon to local business’ and resorts year round. Sierra County really missed the bus to the 20th century. Seems their missing it to the 21st as well. I have great sympathy for the effected retirees, residents, business’ and those with a passion for growth.
BL Former ACO/CSO