Last year, the California Supreme Court published a decision in litigation over changes to state pension law affecting members who entered ACERA membership before January 1, 2013 and retired on or after January 1, 2013. The case was about legislative changes to the definition of “compensation earnable,” which is the salary component of the formula used for determining those members’ retirement allowances. Those changes excluded from “compensation earnable” some types of pay that ACERA had been including for many years, as required by a court-approved settlement agreement.
The Plaintiffs in the litigation sued to prevent ACERA from implementing the legislative changes. They argued that the changes violated the “California Rule,” which generally prevents reductions to members’ benefits after they start working. ACERA took a neutral position on the “California Rule,” but the State intervened to defend the legislative changes. The trial court ordered ACERA not to implement the changes until July 12, 2014, at which time the trial court ordered ACERA to implement the changes.
The Plaintiffs appealed the trial court’s decision. After a decision by the First District Court of Appeals, the California Supreme Court decided to review the case and issued its opinion on July 30, 2020. The main point of the opinion was to affirm that ACERA must apply the January 1, 2013 changes to the definition of “compensation earnable.” The Court concluded that the “California Rule” did not prevent the Legislature from making those changes. After the case was remanded to the trial court for further proceedings, the State argued that ACERA was required to: (1) adjust pensions for members who retired between January 1, 2013 and July 11, 2014 when ACERA was prevented from applying the new definition of “compensation earnable”; and (2) eliminate the practice of “straddling” under which ACERA historically permitted two fiscal years of vacation sell back or vacation cash out to be included in one year of a member’s “final compensation” period. The Plaintiffs did not pursue any claims against ACERA after the case was remanded to the trial court.
On June 17, 2021, the ACERA Board of Retirement made changes to how much vacation sell back and vacation cash out ACERA will include in “final compensation” for members with an effective retirement date on or after June 18, 2021. The most significant change was to eliminate “straddling.” After the Board’s June 17, 2021 decisions, the State dropped all claims and all parties agreed that Judgment should be entered. The Court entered Judgment in ACERA’s favor on November 22, 2021 and no further proceedings are expected.
The Judgment does not require ACERA to take any action and the litigation has come to an end.