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The board of the San Diego City Employees' Retirement System (SDCERS) agreed today (July 17) to look into looser accounting techniques that if implemented could lower the City's annual required contribution, called ARC. Even before today's meeting, Councilmembers Donna Frye and Carl DeMaio warned that tinkering with pension accounting was just what got the City near the brink of bankruptcy. Among the soft accounting methods under consideration would be a change in the so-called corridor. Generally, SDCERS and other pension systems do not simply consider one year or one month's returns as determinative in setting the ARC. The pension systems use smoothing techniques -- averaging the returns over an extended period, for example. The corridor is designed to keep the smoothing within honest bounds. A widening of the corridor would permit SDCERS to say that its returns were higher than they were realistically. Such an accounting change would just transfer the ultimate payment to future generations.
The board of the San Diego City Employees' Retirement System (SDCERS) agreed today (July 17) to look into looser accounting techniques that if implemented could lower the City's annual required contribution, called ARC. Even before today's meeting, Councilmembers Donna Frye and Carl DeMaio warned that tinkering with pension accounting was just what got the City near the brink of bankruptcy. Among the soft accounting methods under consideration would be a change in the so-called corridor. Generally, SDCERS and other pension systems do not simply consider one year or one month's returns as determinative in setting the ARC. The pension systems use smoothing techniques -- averaging the returns over an extended period, for example. The corridor is designed to keep the smoothing within honest bounds. A widening of the corridor would permit SDCERS to say that its returns were higher than they were realistically. Such an accounting change would just transfer the ultimate payment to future generations.