County Workers Can’t |Stop Pension Changes

     (CN) – Public employees in Marin County, California, failed to prove a state-mandated change in how their pensions are calculated unconstitutionally violated their employment contracts, an appeals court ruled.
     At issue in the case was a 2013 amendment to the County Employees Retirement Law that the state Legislature passed in order to curb the practice of “pension spiking.”
     Pension spiking occurs when “public employees use various stratagems and ploys to inflate their income and retirement benefits,” explained Justice James Richman, of the First District California Courts of Appeals, in an August 17 ruling.
     A pension can be spiked through an increase in final compensation or the inclusion of unused vacation pay in the benefit calculation.
     After the economic downturn of 2008, underfunded public pensions received national attention.
     The Stanford Institute for Economic Policy Research estimated California’s shortfall to be “more than half a trillion dollars” in 2010.
     One year later, the Little Hoover Commission advised the governor and legislature that “the spiking games must end. Pensions must be based only on actual base salary … not padded with other pay for clothing, equipment or vehicle use, or enhanced by adding service credit for unused sick time vacation time or other leave time.”
     California’s legislature responded by excluding some items from the calculation of county employees’ retirement income.
     Four Marin County employees, joined by five organizations that represent county employees, sued the Marin County Employees Retirement Association to stop the implementation of the new formula.
     They complained that they “agreed to accept employment and remain employees of their respective employers based on the promised pension benefit.”
     The trial court ruled in favor of the retirement association, stating that the new formula did not violate the employees’ constitutional rights.
     The employees appealed, but the appeals court affirmed the decision.
     “While a public employee does have a ‘vested right’ to a pension, that right is only to a ‘reasonable’ pension—not an immutable entitlement to the most optimal formula of calculating the pension,” Richman wrote.
     Therefore, he stated, the new formula was not unconstitutional.
     “Here, the Legislature did not forbid the employer from providing the specified items to an employee as compensation, only the purely prospective inclusion of those items in the computation of the employee’s pension,” Richman added.

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