Legal matters:
State Supreme Court to review law eliminating pension benefit
The state Supreme Court agreed Wednesday to review the legality of 2013 legislation, challenged by labor unions, that eliminated a pension benefit for hundreds of thousands of state and local government employees in California.
The justices voted unanimously to grant a hearing to the unions and decide whether the law violated the rights of employees to the pension benefits that were available when they were hired.
This benefit, which lawmakers had approved in 2003, allowed employees with at least five years of service to purchase up to five years of additional credits before retiring. A worker who retired after 20 years, for example, could pay for the right to receive a pension based on 25 years of contributions.
The 2003 law did not increase costs to government employers, but it added to pensions at a time that statewide public-retirement systems faced increasing deficits, estimated at $500 billion or more in recent studies. Legislators cited those deficits in 2013 when they barred employees from buying future retirement credits.
A union of 6,000 state firefighters, supported by other state and local labor organizations, challenged the 2013 law. The unions argued that their members had a legal right to the pension benefits that were in effect when they were hired and that the state broke its contractual promise to them by eliminating those benefits.
The state’s high court had ruled in 1978 that California could legally reduce current employees’ future pensions, but only if the employees remained eligible for benefits that were “substantial” and reasonable” when the state acted. Any cutbacks in benefits, the court said, “should be accompanied by comparable new advantages.”
The state’s First District Court of Appeal in San Francisco ruled Dec. 30 that the 2013 law satisfied that standard.
The employees “are entitled only to a reasonable pension, not one providing fixed or definite benefits immune from modification or elimination,” Justice Martin Jenkins said in the appellate panel’s 3-0 written opinion.
Because the 2003 law allowed employees to buy credits for time they had not actually worked, Jenkins said, it did not serve the usual purposes of a pension system, and lawmakers acted reasonably in repealing it.
The state’s high court has not yet scheduled a hearing in the case, Cal Fire Local 2881 vs. CalPERS, S239958.
This is the second pensions case the court has taken up in recent months.
In November, the court agreed to review a high-stakes case in which unions challenged a rollback of public employee pensions. That case involved legislation banning a practice known as pension “spiking,” boosting retirement benefits by taking steps to increase one’s pay during the final years of employment. That is often done by cashing out unused vacation time, sick leave and other nonmonetary benefits.
A state appeals court had ruled in August that the law against spiking, which took effect in January 2013, could be applied to employees who were already working as well as those yet to be hired. The state’s high court has also not scheduled a hearing in this case.