California High Court Upholds End to Pension Perk

SAN FRANCISCO (CN) – California public employees aren’t entitled to a perk that allowed them to boost their pension payouts, the California Supreme Court ruled Monday.

California Supreme Court headquarters in San Francisco. (Photo credit: Coolcaesar/Wikipedia)

In 2003, the Legislature began granting state employees and other members of the California Public Employees Retirement System (CalPERS) the ability to purchase “air time,” or credits to be added to their pensions on retirement. Since pensions are calculated as part of the employee’s annual salary near the end of his or her career, an extra five years credited to one’s pension was a welcome bonus. If someone worked for 20 years, they would be paid a pension based on 25 years of contributions.

Monday’s unanimous opinion by the state’s highest court said it wasn’t illegal for the Legislature to rescind the benefit in 2012 as part of then-Governor Jerry Brown’s pension reform package. As the state wrestled with billions in shortfalls to its two largest pension funds, the Public Employees’ Pension Reform Act did away with lesser benefits like additional retirement service credits, available only to employees who had worked for at least five years, and contribute more to their pensions overall.

The law did not affect those who had bought credits prior to 2012.

“Plaintiffs’ characterization of ARS credit as ‘promised when employees provided service’ suggests the existence of an affirmative commitment by the Legislature to make the opportunity to purchase ARS credit available indefinitely, but they cite no persuasive evidence of such a commitment,” Chief Justice Tani Cantil-Sakauye wrote, adding the credit was “not different in form from a variety of other optional benefits offered to public employees in connection with their work.”

The high court’s decision stems from a challenge to the 2012 law by firefighters union Cal Fire Local 2881, which argued the law violated the California Rule – a spate of legal precedents that bind the state to keep its promises to government workers regarding retirement benefits.

Cantil-Sakauye said the court would not weigh in the issue since the benefit was not a contractual right, and could be taken away by the Legislature at any time.

“Because we conclude that the opportunity to purchase ARS credit was not a term and condition of public employment protected from impairment by the contract clause, its elimination does not implicate the Constitution,” she wrote. “For that reason, we have no occasion in this decision to address, let alone to alter, the continued application of the California Rule.”

The union’s lawyer Gregg Adam did not return a call seeking comment Monday.

Ted Toppin, chairman of Californians for Retirement Security – a coalition representing dozens of unions and 1.6 million public employees – said he was glad the Supreme Court left the California Rule untouched.

“There was always some question about whether air time was a vested benefit. The decision was not unexpected,” he said in a statement. “More importantly, the Supreme Court leaves intact the California Rule, holding that vested benefits cannot be impaired. Thankfully, the decision protects the retirement security of California’s nurses, teachers, firefighters, school employees and countless other public servants and retirees dependent on their hard-earned pensions.”

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