Blog
Court Rules LACERA Can Oversee Its Own Personnel Decisions to Fulfill Fiduciary Duties
The decision from the California 2nd District Court of Appeals may be useful to other systems in supporting their independent fiduciary authority and responsibility over personnel as a key element of system administration.
By: Lizzy Lees, NCPERSNearly 60 percent of public pensions are struggling to attract and retain top talent, according to NCPERS 2023 Public Pension Compensation Survey. Compensation can certainly play a role, as plans are often unable to compete with private sector salaries, but some funds are struggling with the added challenge of not having oversight of their staff's employment classifications and salaries.
Los Angeles County Employees Retirement Association (LACERA) was recently facing these limitations until a June 2024 ruling from the California 2nd District Court of Appeals provided the fund with the authority to manage its personnel decisions in order to effectively fulfill its fiduciary duties.
NCPERS spoke with LACERA CEO Santos Kreimann about what led up the recent court ruling and what it means for the nearly $80 billion AUM fund going forward.
Historically, what kinds of challenges has LACERA had with recruitment and retention?
The LACERA Boards and the fund's executive leadership regularly assess staffing needs to meet the changing benefits and investment environment in which LACERA performs its fiduciary duty to our 190,000 members. LACERA's challenge, as with all public pension systems, is to build and evolve the right team with the right skills to fulfill the fund's fiduciary duty. The organizational chart that worked in the past may not be the best personnel structure for the future. The job market in which we recruit for the best talent also changes and has become more fluid and competitive. When position changes are required – such as new job classifications, a change in salary ranges for existing staff, or a change in the number of existing positions – and the Boards in their prudent judgment approve them as necessary for the required work of the association, LACERA must be able to move forward promptly to obtain final approval from the County of Los Angeles and begin recruiting.
LACERA values its relationship with the County as plan sponsor; however, LACERA's Boards must have the ability to make fiduciary decisions as to the personnel needs of the organization. Delay impacts LACERA's ability to serve members.
What led up to the 2021 lawsuit, Los Angeles County Employees Retirement Association v. County of Los Angeles, where LACERA sought to regain its right to manage the salaries and employment classifications of its staff?
In 2016 and 2017, LACERA conducted comprehensive personnel reviews, identifying the need for several new positions and salary adjustments to meet its strategic priorities and uphold its fiduciary duties to its members and beneficiaries. In 2018 and 2021, the County Board of Supervisors (BOS) ignored many years of its own precedent of implementing such changes without hesitation, and instead refused to adopt the necessary changes to the salary ordinance effectively blocking LACERA from implementing its personnel decisions. The County cited a decades-old case from a different Appellate District, claiming it provided them the authority to block the new classifications and salaries adopted by LACERA's independent fiduciary boards.
LACERA attempted to negotiate with the County to resolve the dispute, but these efforts were ultimately unsuccessful. After the County's 2021 action, LACERA filed a petition for writ of mandate, directing the BOS to comply with the law and adopt the LACERA approved salary ordinance. The trial court was bound to follow the decades-old case and ruled in favor of the County, but LACERA appealed the decision, which has resulted in the recent favorable ruling by the 2nd District. The opinion may be found here.
What does this ruling mean for your organization going forward?
The recent decision recognizes that, under the California Constitution and other governing law and trust principles, LACERA's independent fiduciary Boards have the authority to make final decisions as to necessary classifications and salaries, free of political influence by nonfiduciaries. The decision means that, going forward, LACERA's Boards will be able to make personnel decisions when needed and implement them promptly for the benefit of members without delay or change by the Board of Supervisors or County personnel.
What could this decision potentially mean for other public pensions across the country?
Fiduciary and trust law are similar across the country. The decision may be useful to other systems in supporting their independent fiduciary authority and responsibility over personnel as a key element of system administration.
How can interested candidates apply for open roles at LACERA?
LACERA is an award-winning workplace with career opportunities for professionals in areas ranging from investments to human resources. Open LACERA positions may always be found at https://www.lacera.com/who-we-are/careers.
Comments
There have been no comments made on this article. Why not be the first and add your own comment using the form below.
Leave a comment
Please complete the form below to submit a comment on this article. A valid email address is required to submit a comment though it will not be displayed on the site.
HTML has been disabled but if you wish to add any hyperlinks or text formatting you can use any of the following codes: [B]bold text[/B], [I]italic text[/I], [U]underlined text[/U], [S]
strike through text[/S], [URL]http://www.yourlink.com[/URL], [URL=http//www.yourlink.com]your text[/URL]