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California’s Supreme Court Heard Oral Arguments Today in 2012 “Vested Rights” Lawsuit

On May 5, 2020, California’s Supreme Court heard oral arguments in litigation that started in 2012 over changes to the state pension law affecting “legacy members” of ACERA and two other county retirement systems. Legacy members generally are those who have entry dates into ACERA membership prior to January 1, 2013, which was the effective date of the California Public Employees’ Pension Reform Act (PEPRA). This lawsuit relates only to legacy members who retired on or after January 1, 2013.

Laws that passed in 2012 (at the same time as PEPRA) ordered county retirement boards to stop counting certain cash received during service and at termination of employment in a legacy member’s benefit calculation. The items to no longer be counted were some cash-outs of accumulated leave, “on-call” and “standby” pay, and other one-time payments made during the final compensation period. ACERA was prepared to follow the new law starting January 1, 2013, but the trial court stopped ACERA from following the new law for employees retiring on or before July 11, 2014, after which ACERA began following the law, with a minor exception for “on-call” and “standby” pay items.

In January 2018, an appellate court directed that some of the changes ACERA implemented since July 11, 2014 would have to be changed back to the method ACERA used for calculating benefits before the new law passed. That appellate court decision was appealed to the California Supreme Court and has not become effective.

Oral arguments in the California Supreme Court were heard today. Most of the Justices’ questions related to the state of the law before the 2013 change and the scope of the “California Rule,” which historically has protected public pensions from reduction after a public employee begins working. The Supreme Court will issue a ruling within the next 90 days, although the process could be further extended if any party files a petition for rehearing after the opinion is issued. 

In the meantime, there are no changes—ACERA will continue to follow its current practices for calculating benefits. Members should continue to consult our website and speak directly with retirement staff about their individual retirement situations. ACERA will continue to monitor the pending case and will communicate any prospective changes on this news page and to our email news subscribers. In the future, if a final court order requires ACERA to change any of its practices, ACERA will make those changes at that time and may need to make adjustments in monthly benefit payments paid both before and after the changes are implemented.

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