The California Supreme Court has granted review of a case challenging retirement reforms state lawmakers approved 11 years ago, marking a return of pension spiking questions to the high court for the first time since a 2020 ruling on an Alameda County case. The new case — Ventura County Employees’ Retirement Association v. Criminal Justice Attorney’s Association of Ventura County — raises the issue of whether unused vacation cash-outs that straddle multiple years could be excluded when calculating retirement benefits.
Santa Barbara County Superior Court granted a summary adjudication in favor of VCERA that was later affirmed by the California Second District Court of Appeal. The Supreme Court agreed to hear the case on April 17, and scheduled oral arguments for Nov. 9. Public employees’ retirement benefits are calculated using either the last year, or prior three years of work, depending on which tier the employee fell in. Many local governments created second employee pension tiers with lesser benefits for new employees as part of pension reform in the years following the 2008 economic crash.
Legal Challenges and Rulings
The so-called “California Rule,” a series of 1950s-circa court cases that established ironclad protections for public pensions, makes it difficult to make any changes to existing employee benefits. California courts were kept busy hearing challenges brought by unions and others for several years after the Public Employees’ Pension Reform Act of 2013 passed. The cases were followed nationally, because PEPRA was seen as presenting a challenge to the California Rule. Some other states have similar protections. The state Supreme Court ultimately issued a narrow ruling in the case brought by the Deputy Sheriffs’ Association of Alameda County against the county’s employee retirement association. In that ruling, the court affirmed the state’s right to eliminate pension spiking, a reform outlined in PEPRA.
Ashley Dunning, a Nossaman partner, and the lead attorney representing VCERA in the court and appeals case, called the high court’s decision to hear the case “surprising news for the California county retirement system community,” in an email client alert posted Monday. Following the Alameda decision, numerous county retirement boards, including VCERA, took actions to implement the state Supreme Court’s direction that PEPRA’s changes to the County Employees Retirement Law of 1937 must be implemented by county retirement systems. The 2020 Alameda decision upheld the constitutionality of changes to CERL that were adopted in connection with enactment of PERPA in 2013, Dunning said.
The ongoing challenges and reviews of retirement reform in California demonstrate the complexities and legal implications surrounding pension spiking, calculation of retirement benefits, and the overarching impact on the state’s public pension system. The decisions made by the Supreme Court in cases like Ventura County Employees’ Retirement Association v. Criminal Justice Attorney’s Association of Ventura County have far-reaching effects on how pension reforms are implemented and upheld in the state. It is important for stakeholders in the retirement system to closely monitor these developments and adapt to the changing landscape of pension regulations in California.