‘Pension spiking’ not protected by California law, top court rules – Los Angeles Times

The California Supreme Court on Thursday unanimously upheld a provision in a 2013 law that forbade many county employees from padding their future pensions by cashing in years of vacation or sick pay or working longer hours before retirement.

The practice, known as pension spiking, can lead to a more lucrative retirement income than the pay an employee earned while working.

In a decision written by Chief Justice Tani Cantil-Sakauye, the court said the state law was enacted “for the constitutionally permissible purpose of closing loopholes and preventing abuse of the pension system.”

Public pension payments are calculated based on a worker’s highest year of earnings. Prior to the 2013 law, some county employees were able to inflate their pay, usually at the end of their career.

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Unions and public employee groups challenged the ban on spiking, contending it conflicted with decades of court decisions that created what is known as the California Rule. It guarantees government workers the pension they would be due under the rules that were in place on the day they were hired. Courts ruled that pensions were contracts.

The formula for calculating retirement income could be changed only in a way that was neutral or advantageous to the worker, except for new hires, courts said.

Some business groups had urged the court to use the case to modify the California Rule, which would have affected public employees across the state. The court refused, writing instead a narrow decision.

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“We have no jurisprudential reason to undertake a fundamental reexamination of the rule,” the court said.

David E. Mastagni, who represented Alameda County employees in the case, said he was disappointed for them but glad the rule protecting public pensions survived.

Although Thursday’s decision could be perceived as a “chipping away” of the rule , he said, he believed the court would limit rollbacks of pension benefits to “narrowly tailored modifications just to address perceived abuses or loopholes.”

Former Gov. Jerry Brown championed the new pension laws, which were designed to alleviate a shortfall or hundreds of billions of dollars in state and local government pension systems. Unions quickly challenged the laws.

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In Thursday’s decision, the court said lawmakers “must have the authority, discretion, and flexibility” to address such issues as pension spiking.

Requiring the government to offer a benefit to offset the elimination of pension padding would “significantly undermine” the Legislature’s efforts to close loopholes.

The decision directly affects 20 counties that administer their pension plans under the County Employees Retirement Law of 1937, which the 2013 law amended. Both the city and county of Los Angeles have separate pension systems.

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In a unanimous decision last year, the state high court said the government could reduce pension benefits without running afoul of the California Rule.

The court upheld California’s 2012 repeal of an “air time” benefit that allowed state workers to buy credits toward retirement service.

Source: https://news.google.com/__i/rss/rd/articles/CBMiXGh0dHBzOi8vd3d3LmxhdGltZXMuY29tL2NhbGlmb3JuaWEvc3RvcnkvMjAyMC0wNy0zMC9jYWxpZm9ybmlhLXN1cHJlbWUtY291cnQtcGVuc2lvbi1zcGlraW5n0gEA?oc=5

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