Message from the Firm

By Fred Reish

Last summer, we were hired as special fiduciary counsel for the San Diego City Employees' Retirement System (SDCERS). You have probably read about the SDCERS travails in the newspaper and in benefits publications. It could be the most publicized defined benefit plan in the country.

We were hired for the purpose of assisting the Board of Administration of SDCERS in complying with their fiduciary duties and for reviewing the conduct of their predecessors (with an eye to identifying and correcting any fiduciaries breaches).

For those of you not familiar with public retirement plans, the Board of Administration is similar to a Taft-Hartley Board for a multi-employer plan; for a traditional private sector plan, it might best be described as a combination of the committee and the trustee.

At the end of January, our report was completed and filed with the Board and is now posted on the SDCERS website at http://www.sdcers.org/images/pdf/sdcers_investigative_report_full.pdf. The factual investigation was done by Navigant Consulting, Inc. and we did the legal analysis and conclusions section.

As you can see from the report, we concluded that prior Boards of Administration, as fiduciaries, breached their duties under California state law which, in many ways, is similar to ERISA. While there were a number of reasons for the breaches, it was apparent to us that a significant contributor to the problems was a lack of understanding by the prior Board members of their fiduciary responsibilities. And, we see the same issue with private sector plans. I believe that the only correction for that problem is fiduciary training. It is difficult to make good decisions if you are operating in the wrong context.

My purpose in mentioning this work is not to belabor the past, but instead to give you the benefit of our observations of the work of the current Board of Administration. To their credit, they insisted on an investigation of past acts and they understood their responsibility to clean up any remaining problems. If that does not impress you, you should know that the Board members are either appointed by the City or elected by the employees and serve without pay. They do the work because of their commitment to quality retirement plans and to delivering benefits to retired and disabled employees and their beneficiaries.

I attended Board meetings where cameras from all the local television stations were present. If that isn't daunting, imagine that your committee meetings were telecast on the 6:00 p.m. news.

With that, I have finally gotten to the point of this introduction. If I, as an experienced benefits attorney, can give you one word of advice, it is that you should imagine that your committee meetings will be broadcast on television. If your work was that open and visible, and if you did work that, upon seeing it on television that night, you were proud of what you had accomplished, then you almost certainly would have fulfilled your fiduciary responsibilities. So, if I can encourage you to keep one image in mind, that would be to imagine yourself as a member of the SDCERS Board of Administration, with the cameras rolling in the background.

Of course, as I said earlier, you have to have the right context. It is difficult to make prudent decisions if you don't understand the rules and the objectives of the game.

Learn more about Reish & Reicher's related practice areas:
Employee Benefits