California Police Chief- Fall 2013 CPCA_2017_Spring Magazine.v3 | Page 9

to a “reasonable” pension. In reaching its conclusion, the
First District reviewed the general law relating to pensions,
including several California Supreme Court decisions.
In quoting these decisions, the Court explained
that “‘a public pension system is subject to the implied
qualification that the governing body may make reasonable
modifications and changes before the pension becomes
payable and that until that time the employee does not
have a right to any fixed or definite benefits but only to a
substantial or reasonable pension.’”
After review of the Supreme Court cases noted above,
as well as other pension cases, the Court concluded that
the Legislature did not act impermissibly by amending
Section 31461 to exclude the specified items and categories
of compensation from the calculation of pensions for
current employees. Noting that an employee has a vested
right only to a “reasonable” pension, “not an immutable
entitlement to the most optimal formula of calculating
the pension,” the Court explained that the Legislature,
prior to an employee’s retirement, may alter the formula
and reduce the anticipated pension. The Court further
stated that “short of actual abol ition, a radical reduction
of benefits, or a fiscally unjustifiable increase in employee
contributions” reasonable modifications to a pension
plan were permissible. Based on these principles, the
Court found that neither the statutory change, nor
MCERA’s implementation of that change, amounted to an
impairment of the employee’s receipt of a “reasonable”
pension upon retirement.
The California Supreme Court granted review of the
Marin Association case in November 2016. However, the
Supreme Court stayed any action on the case pending the
decision of the First District Court of Appeal in the case
entitled Alameda County Deputy Sheriffs’ Association, et al.
v. Alameda County Employees’ Retirement Association, et al.
Similar to the Marin Association case, the Alameda County
case involves consolidated challenges to amendments
made to the County Employees Retirement Law of 1937
(“CERL”) by PEPRA. Plaintiffs in the case include various
employee associations. The plaintiffs in Alameda County
challenged their respective county employee retirement
associations’ ability to implement PEPRA as to members
hired before January 1, 2013 (referred to as “legacy
members”). The Superior Court ruled against the plaintiffs.
The Deputy Sheriffs’ Associations appealed. The case is still
pending before Court of Appeal.
Finally, the First District Court of Appeal issued an
opinion in another pension-related case in late 2016 entitled
Cal Fire Local 2881 v. California Public Employees’ Retirement
System (“Cal Fire”). In Cal Fire, the Court concluded that
there was no express vested right to purchase airtime
service credits. The California Supreme Court granted
review of the Cal Fire case on April 12, 2017.
The cases decided by the courts of appeal appear to
signal a potential shift in California pension law. Rather
than entitling an employee to the pension that was offered
at hire, and prohibiting a reduction in such pension unless
the reduction is offset by a comparable new benefit,
both the Marin Association and Cal Fire cases concluded
that public employees are entitled only to “reasonable”
pensions, not pensions that provide fixed benefits immune
from modification. If the California Supreme Court
upholds these decisions, such a ruling may open the door
for further pension modifications by the State, as well
as local government entities, to reduce pension benefits
in an attempt to deal with the alarming pension crisis
taking place in California. It will be some time before the
high Court rules on these issues. In the interim, many
throughout the State anxiously await the Supreme Court’s
clarification of the law governing pensions in California. ■
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