Opinion ID: 1358797
Heading Depth: 3
Heading Rank: 4

Heading: SBCERA's Fiduciary Obligations as a Pension Fund Trustee

Text: (11) (See fn. 10.) We turn to the issue of SBCERA's fiduciary duty to fully inform its members, in this case Hittle, of their retirement options. [10] (12a) As concluded above, there is no substantial evidence to support the trial court's finding that SBCERA had placed Hittle on specific notice of his right to apply for disability retirement by its handwritten notation of September 29, 1978. This notation was inherently ambiguous and uninformative, and cannot be said to have satisfied SBCERA's fiduciary obligation to adequately inform Hittle of his membership options upon termination of his employment. (13) An employee who serves under a pension plan acquires a vested contractual right to a pension. ( Wallace v. City of Fresno (1954) 42 Cal.2d 180, 183 [265 P.2d 884].) A pension plan offered by the employer and impliedly accepted by the employee by remaining in employment constitutes a contract between them, whether the plan is a public or private one, and whether or not the employee is to contribute funds to the pension. [Citations.] The continued employment constitutes consideration for the promise to pay the pension, which is deemed deferred compensation. [Citation.] ( Hannon Engineering, Inc. v. Reim (1981) 126 Cal. App.3d 415, 425 [179 Cal. Rptr. 78].) As a result, [p]ension plans create a trust relationship between pensioner beneficiaries and the trustees of pension funds who administer retirement benefits ... and the trustees must exercise their fiduciary trust in good faith and must deal fairly with the pensioners-beneficiaries. [Citations omitted.] ( Ibid., original italics.) The SBCERA officers, by the acceptance of their appointment, are voluntary trustees, within the meaning of Civil Code sections 2216 and 2222, [11] of the retirement plans available to the beneficiary-members of the Association. (Cf. Hannon Engineering, Inc. v. Reim, supra, 126 Cal. App.3d at pp. 425-426.) As such, the SBCERA officers are charged with the fiduciary relationship described in Civil Code section 2228: In all matters connected with his trust, a trustee is bound to act in the highest good faith toward his beneficiary, and may not obtain any advantage therein over the latter by the slightest misrepresentation, concealment, threat, or adverse pressure of any kind. As this court has previously noted, [i]n the vast development of pensions in today's complex society, the numbers of pension funds and pensioners have multiplied, and most employees, upon retirement, now become entitled to pensions earned by years of service. We believe that courts must be vigilant in protecting the rights of the pensioner against powerful and distant administrators; the relationship should be one in which the administrator exercises toward the pensioner a fiduciary duty of good faith and fair dealing. ( Symington v. City of Albany (1971) 5 Cal.3d 23, 33 [95 Cal. Rptr. 206, 485 P.2d 270].) This fiduciary relationship is judicially guarded by the application of Civil Code section 2235, which provides that [a]ll transactions between a trustee and his beneficiary during the existence of the trust, or while the influence acquired by the trustee remains, by which he obtains any advantage from his beneficiary, are presumed to be entered into by the latter without sufficient consideration, and under undue influence. (12b) With these considerations in mind, we conclude that SBCERA did not fulfill its fiduciary duty to Hittle to deal fairly and in good faith. [12] The means by which SBCERA sought to inform Hittle of his options in disposing of his retirement contributions are tantamount to the misrepresentation and concealment, however slight, prohibited by Civil Code section 2228. SBCERA's obscure handwritten notation constituted its sole effort to inform Hittle of his option to apply for disability retirement. No reference to disability retirement was contained in either the form letter or Distribution of Retirement Contribution form which SBCERA sent to Hittle to provide for the distribution of his retirement contributions. This omission was not remedied by the form letter's invitation to retiring employees to contact the Association if any additional information is required. These factors also support the presumption of Civil Code section 2235, that the advantage to SBCERA resulting from Hittle's choice to withdraw his retirement contributions, rather than seek a life-time allowance, was gained without sufficient consideration and under undue influence. SBCERA's incomplete communications with Hittle are apparently standard and used routinely to inform SBCERA members of their options for disposing of their retirement contributions. It would be a small matter to add to these forms all of the retirement options available to employees. It is not this court's intention to impose unreasonable obligations upon the trustees of a pension trust. Ordinarily when an employee becomes a member of a pension plan he is provided with a booklet or other materials describing the plan in some detail. If the booklet fully and fairly describes the plan and its various options and procedures, and copies are made available, the obligation of the trustees toward a terminating employee may be satisfied by appropriate reference to the booklet itself, supplemented by a provision of forms pertaining to all available choices. (Cf. fn. 10, ante. )