California (San Diego)—Increased Emplo...

California (San Diego)—Increased Employee Contribution, Changed Final Salary Calculation

Posted by StuartBuck in - -View All States - - on February 3, 2015 with Comments Off on California (San Diego)—Increased Employee Contribution, Changed Final Salary Calculation

Law:

California Public Employees’ Pension Reform Act of 2013 (PEPRA) (January 2013)

Type of reform:

The legislation reduced employer contributions, increased employee contributions, and reduced benefits from 3 percent of pensionable compensation to be paid at age 55 to 2.7 percent of pensionable compensation to be paid at age 57.

Case: Deputy Sheriffs’ Association of San Diego County v. County of San Diego, No. 37-2013-00029085 (Superior Court of San Diego County) (filed Jan. 4, 2013)

Status of litigation:

The plaintiffs alleged that the state constitution’s prohibition on the impairment of contracts precludes the application of both the defined benefit formula and the employee contribution provisions of PEPRA to the County of San Diego safety employees who were hired after PEPRA’s effective date and were covered by preexisting collective bargaining agreements due to expire on June 26, 2014.

On Dec. 12, 2013, San Diego Superior Court Judge Timothy Taylor ruled in favor of the county.

The plaintiffs appealed on Jan. 10, 2014, to the 4th District Court of Appeal (Appeal No. D065364), and on Jan. 22, 2015, the appellate court reversed in part, affirmed in part, and remanded the case to the trial court.

Presiding Justice Judith McConnell issued an opinion. First, with respect to the appellants’ assertion that PEPRA violated the contract clause of the state constitution in modifying pension benefits, the court noted that the appellants conceded that employees hired after Jan. 1, 2013, did not have a vested right to the application of the preexisting 3 percent payment at age 55.  Although the appellants alleged that the employees were entitled to those payments under the collective bargaining agreements until their expiration, the court held that there was no constitutional protection for unvested contractual pension rights.  Additionally, California law permits the Legislature to amend pension benefits for prospective employees.

With respect to the appellants’ challenge to increased employee contributions, the court noted that PEPRA provided that “[i]f the terms of a contract. . . between a public employer and its public employees, that is in effect on Jan. 1, 2013, would be impaired by any provision of this section, that provision shall not apply to the public employer and public employees subject to that contract until the expiration of that contract.” Accordingly, the court held that under the plain language of PEPRA, the preexisting agreements governed the terms of employee contributions until they expired, and newly hired employees were not subject to the contribution increase.  Because the court found that the PEPRA contribution increase was barred under its own terms, it did not reach the constitutional question on that issue.

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