Benefits January 2, 2015

Judges Sue CalPERS over Pension Change

Six elected judges say a new pension law in California was illegally applied to them retroactively.
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Six judges elected to California superior courts in 2012 claim in a lawsuit that putting them in a new pension plan effectively reduced their compensation, which violates the state constitution.

The lawsuit states that the Public Employees Pension Reform Act was unfairly and retroactively applied to judges who were elected to the bench before the enactment of the law in 2013. The judges have sued the state, the state controller, the Judicial Council and the California Public Employees Retirement System (CalPERS), according to Courthouse News Service.

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The judges were members of Judges Retirement System II (JRSII) when the law became active January 1, 2013, and changed the terms of their membership. “It increased petitioners’ salary withholdings, permitted reductions to petitioners’ salaries during their terms of office in violation of the Constitution, and diminished the pension benefits they are entitled to earn,” the judges claim, according to the news report.

Instead of a salary withholding capped at 8%, the judges say they learned they would have to pay an additional 6% of the annual cost of funding their pensions. They claim the California Constitution forbids any reduction of the salary of an elected official while in office.

The judges say they spent considerable time and money winning office, and wound down their law practices based in part on their understanding of the compensation at their courts. They seek declaratory judgment and writ of mandate ordering the state to reinstate the terms of their pension and to refund the contributions they say they have overpaid.

Benefits January 2, 2015

Cincinnati Strikes Deal for Pension Solvency

The city of Cincinnati will pay higher contributions to its pension system under a new agreement.
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The City of Cincinnati, along with retirees and various unions representing current employees, have reached a deal to fully fund the city’s pension system within 30 years.

A statement from Cincinnati Mayor John Cranley’s office says recent estimates put the unfunded pension liability at roughly $862 million.

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Terms of the agreement include:

  • $200 million in retiree health care savings;
  • The cost of living adjustment (COLA) for both current retirees and active employees will go to 3% simple interest, instead of compound;
  • Current employees and retirees will take a three-year COLA holiday; and
  • The city will make a larger contribution to the pension annually for the next 30 years—news reports say the city will pay 16.25% of payroll annually.

According to Reuters, voters rejected an initiative in 2013 to shift new city workers to defined contribution (DC) plans.

“This settlement provides certainty and secures our financial position. The process to bring us to this point has not been easy, however I applaud all the parties for their diligent work and commitment to finding a resolution. This outcome will pay dividends for the city for generations to come,” Cranley said in the statement.

 

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