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CA First District Court

CA Court of Appeal strikes down challenge to government's right to reduce pension benefits

In a game-changing decision the California Court of Appeal handed down a decision in case involving MAPE (Marin Association of Public Employees, the largest County union) v MCERA (Marin County Employees' Retirement Association). MAPE had sued over new laws adopted by the CA legislature in their reform measures of 2012 that allowed governments and agencies the right to reduce pension benefits for retirees. The lawsuit concerned the reform measure regarding "spiking" of pensions prior to retirement.

Among other things, the ruling states that

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. And the Legislature may, prior to the employee’s retirement, alter the formula, thereby reducing the anticipated pension. So long as the Legislature’s modifications do not deprive the employee of a “reasonable” pension, there is no constitutional violation.


IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT - DIVISION TWO

MARIN ASSOCIATION OF PUBLIC EMPLOYEES et al., Plaintiffs and Appellants, v. MARIN COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION et al., Defendants and Respondents; THE STATE OF CALIFORNIA, Intervenor and Respondent.

The practice known as “pension spiking,” by which public employees use various stratagems and ploys to inflate their income and retirement benefits, has long drawn public ire and legislative chagrin. Effective January 1, 2013, the Legislature amended Government Code1 section 31461, a provision of the County Employees Retirement Law, with the aim of curtailing pension spiking by excluding specified items from the calculation of retirement income. A number of individuals currently employed by various governmental entities in the County of Marin, together with a number of organizations representing current county employees, brought suit to halt implementation of the revised formula. The trial court concluded application of the new formula to current employees did not amount to an unconstitutional impairment of the employees’ contracts, and sustained the pension authority’s general demurrer without leave to amend.

After an extensive independent review, we reach the same conclusion and affirm, holding that the Legislature did not act impermissibly by amending section 31461 to exclude specified items and categories of compensation from the calculation of pensions for current employees. As will be shown, 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. And the Legislature may, prior to the employee’s retirement, alter the formula, thereby reducing the anticipated pension. So long as the Legislature’s modifications do not deprive the employee of a “reasonable” pension, there is no constitutional violation. 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. Neither the statutory change, nor the implementation of that change by the county pension agency, amounts to an impairment of the employee’s receipt of a “reasonable” pension upon retirement.

TO READ THE ENTIRE DECISION CLICK HERE