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Local News

Santa Barbara Faces $1.6 Million in Unfunded Liabilities to Pension Holders

The City Council approves transferring more than $700,000 from a self-insurance fund to help make up for the shortfall

Facing $1.6 million in unfunded pension liabilities for 18 retirees, the Santa Barbara City Council voted Tuesday to approve transferring more than $700,000 from a self-insurance fund to help make up the difference.

Some of the city’s oldest workers are beneficiaries who, to put it bluntly, lived longer than expected, and returns on the pensions were less than officials had hoped for, creating a liability.

Unfunded liabilities aren’t unusual when talking about the state’s CalPERS program, which manages 1.6 million state workers and retirees and, subsequently, faces up to $100 billion in shortfalls.

Tuesday’s council item focused on three retirement programs that predate CalPERS, and were instituted in 1927 and 1937. They’re closed plans, which means no new members were added since the switch to CalPERS, but the 18 pensioners or their beneficiaries still involved in the plans receive monthly payments.

The first plan was created for police and fire personnel who worked with the city from 1927 to 1937, when the plan was updated. There’s one beneficiary left; he’s 92 years old and receives $3,790 monthly.

The second covers police and fire personnel who were hired from 1937 to 1965, when the city joined CalPERS. A separate trust fund was created for this one, and it’s independently managed and has eight members, who receive nearly $10,000 monthly, or $1,250 each.

Another group of pensions is for death and disability benefits for employees working during that time period, and there are nine members whose average age is 80. Those beneficiaries are expected to live another 10 years — a fact that has led to the liabilities, according to city Finance Director Bob Samario.

“The actuary told me that once you reach a certain age, you sort of miss all of the things that could go wrong,” he said to laughs, adding that someone who’s 70 is more likely to make it age 80 than a 50-year-old.

“We’ve been monitoring the situation,” Samario said, and the city has known about the liability for about five years. “The liability isn’t going away,” he said, and encouraged the city to contribute more than $700,000 to the trust fund, which could begin earning interest.

The money would come from the city’s self-insurance fund, which “has been doing better than expected,” Samario said, adding that the pensions aren’t expected to cause any problems in the 2011 budget.

The plans still will be short on funds, but the amount allocated Tuesday will make a substantial dent in the deficit, Samario said, and the council may be able to address the balance when the economy improves.

Noozhawk staff writer Lara Cooper can be reached at .(JavaScript must be enabled to view this email address).

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