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California Supreme Court Does NOT Overturn California Rule
The California Supreme Court on July 30 unanimously issued a narrow ruling limiting the types of compensation that may be counted in pension calculations, but declined to overturn the California Rule, a set of legal precedents dating back to at least 1955 that protects pensions under the contract clause of the state's constitution.
California Supreme Court Does NOT Overturn California Rule
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The California Supreme Court on July 30 unanimously issued a narrow ruling limiting the types of compensation that may be counted in pension calculations, but declined to overturn the California Rule, a set of legal precedents dating back to at least 1955 that protects pensions under the contract clause of the state's constitution.
It was the second unsuccessful challenge to the California Rule in two years. In March 2019, the California Supreme Court upheld the rule in Cal Fire Local 2881 v. California Public Employees' Retirement System. Twelve other states follow the California Rule, though three have modified it, the Sacramento Bee has reported.
The more recently decided case was brought by the Alameda County Deputy Sherriff's Association vs. the Alameda County Employees Retirement Association. In its ruling the Supreme Court upheld a law ending the practice of so-called pension spiking for county employees, saying it was enacted "for the constitutionally permissible purpose of closing loopholes and preventing abuse of the pension system."
However, the court said in its opinion, it saw “no jurisprudential reason to undertake a fundamental reexamination” of the California Rule.
Public pensions are generally calculated based on a worker's highest year of earnings. Public pension plans differ as to whether and how certain types of compensation—such as unused leave and overtime—count toward the final pension calculation.
The court said a state law implemented on January 1, 2013, didn't violate contracts by amending the law governing the county systems even though the change affects employees hired before the law took effect. The court found the law clarified existing rules and closed loopholes rather than introducing more substantial new changes, which the court called a “proper objective” in keeping with legislators' lawmaking authority.
David E. Mastagni, who represented Alameda County employees in the case, told the Los Angeles Times he was disappointed for them but glad the California Rule survived. The ruling indicated the court would limit rollbacks of pension benefits to narrow "modifications just to address perceived abuses or loopholes."
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