A Contra Costa judge plans to uphold most of a new state law designed to end pension spiking practices in which workers boost their retirement pay by as much as 15 percent.
In a tentative ruling, Judge David Flinn concludes public employees, when calculating their pensions, were never entitled to count as income compensation received at termination for unused leave time.
Employee groups in Contra Costa, Alameda and Merced counties challenged the law, signed by Gov. Jerry Brown in 2012. They claim it undermines past promises to workers and pension board practices.
Flinn, ruling in all three cases, said those promises were not binding because they were illegal to begin with. All the new law did, he said, was reaffirm past state law and court rulings the pension boards had ignored.
Although his ruling is not final, Flinn said in court Friday that he will not make substantive changes. Once the ruling takes effect, which won't be before April 25, employees will have 60 days to retire without its limitations.
The decision primarily affects Contra Costa employees hired before 2011 and Alameda County workers hired before 2013. Labor groups opposing the law and the state Attorney General's Office, which is defending it, will appeal.
The judge won't apply his ruling to people already collecting pensions. The effect on retirees was not challenged in the case, so that issue will remain unaddressed.
The case stems from reports in this column dating back five years. If upheld, Flinn's decision would have the biggest impact in Contra Costa. Alameda County would see less change because its previous rules were not as egregious.
The new state law affects 20 county-level retirement plans operating under different statutes than the California Public Employees' Retirement System, the nations' largest pension plan, which is unaffected by the case.
Public pensions are usually calculated based on a formula that includes employees' top year or top three years of income. At issue is counting in that income compensation for unused leave time, especially vacation.
The legality of that was first publicly called into question in this column in 2009 as part of an examination of the $284,000 starting pension for retired San Ramon Valley fire Chief Craig Bowen.
It turned out that the Contra Costa County Employees' Retirement Association had been counting payments for unused vacation when calculating all pensions, despite its attorney's 1997 advice that the practice was impermissible.
In 2009, with a spotlight on Contra Costa pension spiking, an attorney for the fire district and a new one for the retirement association, also opined that the practice violated law and court rulings. In response, the retirement association ended the practice for new employees, but continued allowing the spiking for workers hired before 2011.
In 2012, as state lawmakers passed pension law changes, this column exposed a loophole that would have legalized such spiking for all 20 county-level pension systems. In reaction, lawmakers rushed through corrective legislation reaffirming past law and court rulings. That bill sparked the current litigation.
Flinn's ruling addresses three practices involving unused leave:
One-time payments at termination for unused leave. Flinn ruled that counting such payments in pension calculations is illegal, and always has been. This, the most significant part of the ruling, will affect most Contra Costa and Alameda County workers.
Annual payments for sale of unused vacation. Alameda County employees and most management workers in Contra Costa can annually cash out unused vacation. Flinn and both sides in the litigation agree such payments for up to a year's worth of vacation time may legally be counted in pension calculations.
Annual sale of unused vacation time in excess of that earned in a year. Flinn ruled that counting such payments in pension calculations is illegal. But, under a legal fairness principle, the judge allowed it to continue because employees had been led to believe they were entitled to it. Employees of the Central Contra Costa Sanitary District are among a small group who will benefit from this.
While there will still be lengthy appeals, the ruling recognizes what some have been saying for years: The spiking was never legal to begin with.
Daniel Borenstein is a staff columnist and editorial writer. Reach him at 925-943-8248 or firstname.lastname@example.org. Follow him on Twitter: @BorensteinDan.