The California Public Employees' Retirement System is seeking to sue bankrupt San Bernardino, Calif., over missed pension payments, arguing that federal law doesn't protect the city from the state agency.

San Bernardino failed to make at least $5 million in pension payments and has an unfunded liability of about $143 million, according to court papers filed by Calpers, as the agency is known.

"If participants in the Calpers system fail to timely make payments, then Calpers will be unable to provide an actuarially sound retirement system," the pension fund said in a filing yesterday in U.S. Bankruptcy Court in Riverside, Calif.

In August, San Bernardino became the third California city to file bankruptcy in less than three months.

A fiscal emergency, brought on by a $46 million budget shortfall, forced it to stop paying some creditors and seek court protection, the city said.

In its filing, Calpers repeated arguments it made previously in the bankruptcies of both San Bernardino and Stockton, California. The pension fund said it should be given priority over other creditors, a claim that may be tested for the first time in San Bernardino's case.

San Bernardino filed for bankruptcy under Chapter 9 of the U.S. Bankruptcy Code, which is reserved for governmental agencies.

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