California State Pension Cuts Constitutional

California may cut the retirement benefits of some public employees without running afoul of the state Constitution, a state appeals court ruled Thursday.

The Fourth District Court of Appeal upheld the California Public Employees’ Pension Reform Act of 2013, saying it does not violate the state Constitution’s contract clause.

But the ruling did have some good news for employees.  It also held the plain language of the law prevents employers from imposing substantial increases on the amount workers must contribute to their retirement plans.

The suit was filed by the deputy sheriffs’ union in San DiegoCounty challenging the defined benefit formulas applied under the pension reform act.

The appellate ruling overturns the decision of San Diego Judge Timothy Taylor.

The union argued the law unconstitutionally impaired two union contracts and county obligations under the contract terms.

With the new 2013 law, the formula reduced pension compensation. Employees who could retire at age 55, were to receive 3 percent of their pensionable wage for every year of service.  That would be reduced to 2.7 percent at age 57, under the new formula.

The law also stated that new employees must pay 50 percent of their own retirement contributions.  But the appeals court held that the law limited that to newly hired employees after the current contract expired in June, 2014.

Case:  Deputy Sheriffs’ Association of San DiegoCounty v. County of San Diego,

 

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