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Old 01-10-2018, 02:13 PM
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Mary Pat Campbell
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
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California Appeals Court Says No to Taking Away Pension Benefits
Case will ultimately end up in California Supreme Court.
A California appeal court panel has ruled that using unused vacation time to increase public workers’ defined benefit pensions is not a guaranteed right, but at the same time said depriving workers of the pension increase would not be “equitable.”

The ruling by the three-member court panel sitting in San Francisco on Monday comes as public-sector workers in three California counties—Alameda, Contra Costa, and Merced—had challenged California Gov. Edmund Brown Jr.’s 2013 pension reform law, which outlawed so-called pension-spiking.

Public pensions payments in retirement are usually based on the compensation made in the last year or last several years of employment. The California Supreme Court has already said, even before Monday’s ruling, that it plans to hear an appeal of the decision. It is one of three cases the court has said it will review that will ultimately decide whether the pension benefits guaranteed to public workers at the time of employment can be changed.

The so-called California rule, which dates to a ruling by the California Supreme Court in 1955, has held that the accrued and future benefits of public workers are protected and cannot be altered.

Variations of the law have been used in at least 12 other states. While a ruling or rulings by the California Supreme Court would not be binding on other states, it is being carefully watched for its potential to protect or erode DB plan benefits across the US.

The issue is coming as pension plans wrestle with billions of dollars in unfunded liabilities due to poor investment returns, less active workers on the payroll compared to retirees, and longevity increases. Public pension plans in California have an unfunded liability of more than $350 billion.

The appeal panel Monday also concluded that the governor’s 2013 law “impairs a vested right” that the public-sector workers could use pay they received while being on call towards determining their final pension benefit. But the panel ordered a lower trial court to review whether taking away the benefit was “reasonable.”

Brian Ferguson , a spokesman for Brown, did not respond to an emailed response for comment. Attorney Timothy Talbot, who represented the Contra Costa Deputy Sheriff’s Association, said in an interview, “we gained a victory for our clients in the three counties.”

While the appeal panel in Monday’s ruling had said that using the unused vacation time towards the final payout was not a guaranteed benefit, it reasoned that workers expected the benefit, so it would be unfair to take it away from them.

Another California appeal panel in Marin County had ruled last year that public sector workers in that county were only entitled to a “reasonable pension,” not a set guarantee of benefits. That case involved workers covered by the Marin County Employee’s Retirement Association.

The Supreme Court has said it plans to consolidate the Marin case with the case in Alameda, Contra Costa, and Merced counties.

Court briefs have been submitted to the California Supreme Court in a third case involving workers covered by the California Public Employees’ Retirement System (CalPERS) in Sacramento. In that case, public sector workers covered by CalPERS are contesting a portion of the governor’s pension legislation that outlawed the selling of pension credits, that could add up to five years to a public worker’s retirement.

Brown is intervening in several of the court cases. His lawyers filed briefs in the Marin case in November, and in December argued before the appeals panel in the Alameda, Contra Costa, and Merced counties’ case that employees were only entitled to a “reasonable” pension.
California Pension Battles Play Out in Court

SAN FRANCISCO (CN) – A state appeals court ruled that overtime, severance pay and on-call pay cannot be included in pension formulas for public employees in the latest in the seemingly ceaseless battle over pensions in California.

A three-judge panel of the First Appellate District in the California Court of Appeals attempted to strike a balancing act on Monday between a lower trial court ruling that set forth a rigid interpretation of the state’s pension reform and public employee unions that wanted to give discretion entirely to County Employee Retirement [CERL] boards.

“In the end, we believe that the correct understanding of board discretion under CERL lies somewhere in between the expanded notion of discretion espoused by appellants and the constrained, arithmetical approach endorsed by the trial court,” Judge Timothy Reardon wrote for the panel in a 73-page opinion.

The opinion sets forth the complexities of the issue, which pits public employees – who believe they are entitled to pension after years of service – against public entities that worry the rising costs of retired employees will render them less able to address the pressing concerns of their institutions and constituents.

In 2013, on the heels of The Great Recession, Governor Jerry Brown signed the Pension Reform Act into law.

Part of the law’s purpose was to end what many viewed as pension abuses. In California, the formula for an annual pension is based in part on the salary earned by an employee in his or her final year of employment.

Investigations found that many employees were padding their final salary with items like equipment or vehicle use, overtime and on-call pay, sick leave and vacation time cash-outs, and other related pay variables.

In the aftermath of pension reform, several public employee unions sued in state court seeking court declarations about exactly what was and was not permissible under the new law.

In the present instance, the Alameda County Employees’ Retirement Association and other related unions sued in Contra Coast Superior Court.

The first of their two main points was that overtime, vacation and sick leave cash-outs, and on-call pay should be included in the employee’s final salary and thus incorporated into the pension formula.

Second, they asked whether legacy employees – or those who were hired prior to the 2013 Pension Reform Act – should be subjected to the changes or guided by the law as it previously stood.

The appellate court agreed with the superior court’s ruling that overtime pay should not be included in pension equations.

The unions had argued that CERL Boards should have the discretion to decide what does or does not get included. The court shot this notion down, saying boards cannot decide to include items explicitly rendered impermissible by law.

“An item of compensation is either includable in compensation, compensation earnable, and final compensation under the CERL statutes, or it is not,” Reardon wrote.

However, the unions were not entirely without victory, as the court ruled vacation and sick leave cash-outs should be included in final salary formulas.

“Moreover, many such premiums and incentives—including the in-service leave cash-outs here at issue—can be understood simply as increased salary payments, specially designed by employers to encourage certain employee behaviors, such as longevity, foregoing time away from work, and the development of special employment enhancing skills,” Reardon wrote.

However, terminal pay and on-call pay are not included, according to the appellate court.

Terminal pay is when an employee is fired or laid off, but is entitled to the rest of his or her salary for a given year. On-call pay is when an employee may not be working, but needs to be available in case of emergencies, as is often the case for firefighters and police officers.

The appellate court remanded the question of whether legacy employees should be exempt from the 2013 law’s major changes back to superior court, citing insufficient briefing from both sides.


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