The Sacramento County Employees’ Retirement System (SCERS) filed a breach of contract lawsuit on April 19 in Sacramento Superior Court against Telus for failing to deliver a technological project.

SCERS is seeking recovery of more than $18 million.

In 2017, SCERS conducted a competitive procurement process that resulted in awarding a contract to Morneau Shepell (later known as LifeWorks and currently known as Telus) to implement a commercial, off-the-shelf pension administration system to replace the manual processes and 20-year-old technology that SCERS uses to process retirement benefits.

After six years, Telus “left SCERS with a skeletal mismatch of functions that requires far more labor, administration and cost than the decades-old legacy manual system and processes it sought to replace,” according to the lawsuit. “SCERS never received a competent and reliable System. Instead, [the vendor’s] System was not ‘commercially available,’ failed to perform as represented, is replete with technical deficiencies, and exhibits functionality problems that pose a significant risk to SCERS’s administrative responsibilities and objectives, such that the system is simply unusable.”

SCERS suspended the project in 2023 after almost six years of implementation efforts. The contract was ultimately terminated on December 31, 2023.

SCERS Chief Executive Officer Eric Stern said SCERS maintained its legacy systems in parallel throughout the project’s failed implementation in part to ensure that benefits were calculated accurately. However, the effort caused service delays for members and placed significant strain on SCERS employees, he said.

“As fiduciaries over the SCERS fund, we have a responsibility to ensure that we can timely deliver the benefits and related services our 30,000 members have earned,” Stern said. “These delays were unacceptable, and our members and staff deserved better.”

The case is Sacramento County Employees’ Retirement System vs. Telus Health (US) Ltd. 

About SCERS

Established in 1941, SCERS manages a $13 billion pension fund that provides retirement, disability, and death benefits for 30,000 current and former employees, retirees, and beneficiaries of the Sacramento County government and other area agencies.