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Paychecks and a California Supreme Court Pension Ruling

Posted: 7/31/2020 Tags: benefits legislation pension policy representation retirement salary Tags Views: 1615

Pay Warrants

Not all of the July 1, 2020 adjustments and increases have made it into state employee pay warrants. Excluded employees related to the SEIU bargaining units (1, 3, 4, 11, 14, 15, 17, 20 and 21) will see the $260 health affordability payment in a separate pay warrant, which appears to be on track to issue within approximately two weeks.

As expected, the pay warrants of excluded employees related to IUOE units 12 and 13 contain the “OPEB/CERBT” deduction for prefunding retiree healthcare. We await the pay letter and differential providing pay to offset this deduction. ACSS also expects implementation of a special salary adjustment for employees in the criminalist series and an adjustment to longevity pay for some S07 and M07 excluded employees.

An error at the State Controller’s Office resulted in too little being withheld from July paychecks for the employee portion of the required contribution toward retirement. The amount of the error varies based on salary, but is estimated to be near $100 for the highest earners and less for other employees. Next month’s paychecks will have the correct amount deducted for retirement. Next month will also include an additional one time employee deduction labeled as “*PERS ADJ” to collect the rest of the July employee retirement contribution. This means that state employees will not likely see the “correct” amount of their take home pay checks until the September pay period.

There are a very small number of ACSS members who were excluded by CalHR from expected special salary adjustments. ACSS will continue to work with CalHR to address these exclusions and other issues arising in connection with salary adjustments.

Pension Ruling Preserves the Core of the “California Rule”

The California Supreme Court issued a unanimous ruling on July 30, 2020 in Alameda County Deputy Sheriff's Association v. Alameda County Employees’ Retirement Association. This significant pension case concerned pension cuts for local public employees following the Public Employees’ Pension Reform Act of 2013 (PEPRA) where overtime, callback and vacation pay were eliminated from pension calculations.

Although it is a local pension case, the legal issues concerned the long standing “California Rule.” Since 1955, the courts have held under the California Rule that once pension benefits are granted to a public employee, they are vested and cannot be modified for the duration of an employee’s career.

ACSS joined in the requests for the high court to hear this pension case to preserve the long-standing California Rule to protect from the possibility of your pension being changed by future legislation or through an initiative measure. With this California Supreme Court ruling, that goal was largely accomplished.

Although the court allowed the pension modifications challenged by the local unions, it did so by finding the changes closed loopholes to eliminate pension spiking. This narrow approach rejected the arguments to rescind or modify the California Rule and broadly allow changes to vested pension rights.

The ruling may present an opportunity for narrow pension modifications, but any modifications still have to meet stringent constitutional standards protected by the contracts clause. In short, the core defined benefit formulas and provisions governing state employee pensions and retirement calculations remain protected and unaffected by this decision.


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State Budget Deficit Leads to Employee Compensation Reduction Proposals as Part of the May Revise

Posted: 5/14/2020 Tags: budget COVID-19 legislation pension policy salary Tags Views: 8425

In response to a state revenue reduction of over 30 percent, the Administration is proposing a number of costs savings measures including reductions in employee compensation of 10% from June 2020 levels and proposed reductions in state operations costs (office space, leases, travel, and procurement).

The plans were outlined to labor representatives yesterday in connection with today’s release of the Governor’s “May Revision” to the state budget proposal. CalHR Director Eraina Ortega and Deputy Director Paul Starkey held a call this morning with ACSS Executive Director Rocco Paternoster and ACSS attorney Gerald James to discuss the proposals and impacts for excluded employees.

As part of the budget process, the Administration is seeking to “pull back” all salary increases (general salary increases and special salary adjustments) scheduled for July 1, 2020 for excluded employees and rank-and-file employees. They will also seek authority to reduce employee compensation by 10% effective July 1, 2020.

CalHR will attempt to negotiate the 10% reductions with each rank-and-file bargaining unit. If agreements cannot be reached with those units, the authority sought from the Legislature would allow CalHR to impose two days of unpaid furloughs per month, which would result in a 9.24% salary reduction, on state employees effective July 1, 2020. As of this morning, CalHR intends to link employee compensation reductions for supervisors and managers with their related bargaining units.

To mitigate the impact of any compensation reductions, the state is also considering a pause on state employees paying to prefund retiree healthcare. If passed by the Legislature, relief from excluded employees paying this “OPEB” contribution would range from 4.6% of salary to 1.4% of salary (for the highest paid state employees). ACSS realizes this does not come near offsetting the proposed reduction in take home pay, but it is a helpful mitigating step.

The proposed reductions are based on current economic projections from the Administration. The Legislature makes its own economic projections. The budget authority sought by the Administration will include a provision that if additional federal funding is received (related to the pandemic), these employee compensation reductions can be revisited.

While the employee compensation reduction plan will likely be impacted by bargaining conducted by the rank-and-file bargaining units, ACSS has already begun discussions with CalHR over the details related to excluded employees. ACSS will also seek to ensure that the authority to reduce compensation provided by the Legislature to CalHR is done in a manner that protects the interests of excluded employees as best as possible by ensuing compensation decreases are equitable. We will keep you apprised as these significant budget decisions and proposed reductions move forward.


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California Supreme Court Hears Argument in Local Pension Case

Posted: 5/5/2020 Tags: benefits legislation pension policy retirement Tags Views: 803

The California Supreme Court held oral argument on May 5, 2020 in Alameda County Deputy Sheriff's Association v. Alameda County Employees’ Retirement Association. This is one of the two significant pension cases pending before the state high court concerning pension cuts for local public employees following the Public Employees’ Pension Reform Act of 2013 (PEPRA).

Although it is a local pension case, the legal issues argued may impact the long standing “California Rule.” Since 1955, the courts have held under the California Rule that once pension benefits are granted to a public employee, they are vested and cannot be modified for the duration of an employee’s career. ACSS joined in the requests for the high court to hear these types of pension cases to preserve the long-standing California Rule to protect from the possibility of your pension being changed by future legislation or through an initiative measure.

In Alameda, the Deputy Sheriff's union and others challenged the elimination of overtime pay, on-call pay, call-back pay, vacation and sick leave sold back, recruitment bonuses, and other items from pension calculations. The lower appellate court had ruled that many of these pension cuts for current employees were legal, but ruled some pension benefits required further review under the California Rule. Allowing the pension reductions for current employees is a significant deviation from the California Rule. Both sides had asked the high court to review the case.

At oral argument, the county retirement boards argued that including these “pension spiking” items in a pension calculation was never lawful and that employees had no reasonable expectation that they would be included in a pension calculation for future service. The unions argued that this deferred compensation cannot be changed for existing employees during their public employee careers.

It is unclear whether the Supreme Court’s decision in this case will be decided on broad constitutional grounds with possible impacts on the California Rule and implications for all public employees and their pensions, or will be decided on a narrow basis, affecting only the parties to the litigation or local employers and employees. The matter was taken under submission with a decision expected in the next month or two.

ACSS will continue to keep you apprised of important pension issues and inform you of actions taken to protect the interests of excluded state employees.


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CalPERS Update: Earnings and Health Benefit Plans

Posted: 7/19/2018 Tags: benefits pension retirement Tags Views: 1555

CalPERS has reported a preliminary 8.6 percent net investment return for the 12-month period that ended June 30, 2018. This is the second year in a row that earnings have exceeded the long-term assumed rate of return, which is 7.25% for the current fiscal year. With assets of more than $351 billion, CalPERS overall funded status rose three percentage points to an estimated 71 percent.

CalPERS has also concluded negotiations with health plan providers for 2019. Overall rates will increase 1.16 percent with members in Basic Health Maintenance Organization (HMO) plans seeing an average increase of 0.37 percent and members in Preferred Provider Organization (PPO) plans will see an overall average increase of 2.83 percent. While these are averages, some plans have significant increases (22.96% for Anthem HMO Traditional and 19.80% for PERSCare PPO) and some plans have significant decreases (-25.56% for PERSSelect PPO). Over the objections of ACSS and other state employee advocates, HealthNet will be leaving the Sacramento market in 2019 and Blue Shield Access+ will exit from eight Bay Area counties in 2019.

Because of the wide variances in rates and changes in plan availability, it will be particularly important to evaluate your options during this year's Open Enrollment period from September 10 to October 5.  CalHR will soon release the "CoBen Allowance" for 2019 which is the state employer contribution for health, dental and vision for the 2019 calendar year. Prior to Open Enrollment, CalHR will update the "Benefits Calculator" on the CalHR webpage which allows comparisons of out-of-pocket costs depending on health benefit selections. ACSS will provide the CoBen Allowance amount for 2019 and a link to the Benefits Calculator when it is available.


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May Revision of the Budget: Continue Saving for the Future as Surplus Grows

Posted: 5/16/2018 Tags: benefits budget legislation pension policy retirement salary Tags Views: 1795

Governor Jerry Brown released his May Revise of the Budget on May 11th, 2018. ACSS Legislative Advocate Ted Toppin provides relevant analysis and insight of the May Revise that may be of interest to managers, supervisors and other excluded state employees:

“The state continues to generate revenue at unprecedented levels and now it is coming in faster. In January, the surplus was predicted to be $6 billion. The surplus now is expected to be $9 billion.

The May Revise proposes saving for the future. In January, the Governor proposed to put an additional $4.4 billion into the state rainy day fund, topping it out at $13.8 billion – the constitutional limit. In the May Revise, he socks another $3.3 billion into a different reserve account.

Budget negotiations between the Administration and the Legislature will now heat up. The Governor will urge restraint. Legislators of both parties will push for billions of dollars in additional spending. Ultimately, you can expect the Governor to agree to modest increased spending while keeping his rainy day reserves. Regardless, the Legislature will pass a budget by June 15 and the Governor will sign it by June 30.

Here’s what the May Revise says about issues important to ACSS members:

State Employee Compensation

The January budget proposal included $1.2 billion ($589.5 million General Fund) for:

  • increased employee compensation
  • health care costs for active state employees
  • retiree health care prefunding for active employees

The May Revise decreases this amount by $8.1 million to reflect:

  • corrections to 2019 health rates
  • natural changes to enrollment in health and dental plan
  • updated employment information for salary increases
  • updated employment information for salary increases
  • revised pay increases for judges
  • updated costs related to the salary survey estimates for the California Highway Patrol (Bargaining Unit 5)

State CalPERS Contribution

The state’s contribution – $6.2 billion – to CalPERS is down slightly ($18 million) from the January estimate. The decline in the revise is mainly driven by:

  • CalPERS’ higher than expected investment return in 2016-17
  • the benefit of the state’s additional $6 billion pension payment in 2017-18
  • higher than projected enrollment of members under the Public Employees' Pension Reform Act of 2013, who have lower benefit formulas

Overall, pension reforms are beginning to reduce costs. The May Revise proposes no additional pension reforms.

State Health Care/Retiree Health Care

The May Revise makes no changes to the expected costs of providing state employees and state retirees health care.

State Employee Position Increases

The May Revise also reports that there is expected to be an additional 3,878 position in state government next year for a total of 210,767 in FY 2018-19.”

The Governor’s complete budget summary and draft budget can be found here: www.ebudget.ca.gov.


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California Supreme Court to Review a Trio of Pension Cases

Posted: 4/26/2018 Tags: benefits legislation legislature pension policy retirement Tags Views: 2273

Protecting your pension and retirement benefits is a core principle for ACSS. Three cases pending before the State Supreme Court raise questions regarding the validity of the long standing “California Rule.” Since 1955, the courts have held under the California Rule that once pension benefits are granted to a public employee, they are vested and cannot be modified for the duration of an employee’s career.

>> Read more...


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Cast Your VOTE! Miller Will Protect YOUR Pension.

Posted: 9/23/2017 Tags: benefits election pension retirement Tags Views: 1375

Hurry! Monday October 2 is the last day you can cast your vote in the CalPERS election. ACSS encourages you to support David Miller for CalPERS Board Member At Large, Position A. Miller is committed to putting the interests of CalPERS members first. Miller has spent 25 years as a union member, union leader and a founder of Californians for Retirement Security, the broad coalition formed in 2005 to fight against non-stop attacks on public employees and our pensions. With integrity and commitment, Miller will stand up to ensure the system is always there to provide retirement security for each and every employee and retiree.

Click here to vote online NOW! Miller needs YOUR support to help protect pensions and ensure the best interests for all excluded employees.


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Governor Brown's "Push Me Pull Me" May Revision of the Budget

Posted: 5/12/2017 Tags: budget legislation pension policy salary Tags Views: 2573

Governor Jerry Brown released his May Revise of the Budget on May 11th, 2017. Here, ACSS Legislative Advocate Ted Toppin provides relevant analysis and insight of the May Revise that may be of interest to managers, supervisors and other excluded state employees:

"With the Governor’s release of his May Budget revision yesterday, it was hard not feel as if you were being pushed and pulled in opposite directions. On the one hand, the Governor again highlighted the largest threats to the budget:

  • Recession. Our economic expansion is the third longest in California history and a “recession at some point is inevitable.”
  • Federal Funding Cuts. The federal government is contemplating “actions that could send the state budget into turmoil.”

In his remarks the Governor went so far as to say “make no doubt about it, cuts are coming in the next few years, and they’ll be big.”

On the other hand, the May revise reports revenues are higher than expected in January and proposes new spending:

  • January revenue projections were $5.8 billion short of what was expected. The May revise reports projected revenues have improved by $2.5 billion since then.
  • The May revise proposes new spending on K-12 school ($1.4 billion), county IHSS services ($400 million), and continuing state funded childcare ($500 million).

Reducing CalPERS State Pension Liabilities. Perhaps the most important and interesting May revise proposal for state supervisors and managers (indeed all state employees and retirees) was the Governor’s proposal to make an immediate infusion of an additional $6 billion supplemental payment to CalPERS. The money will come as a loan from the Surplus Money Investment Fund. If it works as expected, it really is a clever and innovative approach to reducing the unfunded CalPERS liability for state employees.

According to the May revise “this action effectively doubles the state’s annual payment and will mitigate the impact of increasing pension contributions due to the state’s large unfunded liabilities and the CalPERS Board’s recent action to lower its assumed investment rate of return from 7.5 percent to 7 percent.” After the transfer, the $6 billion will be expected to earn a 7 percent return from CalPERS, compared to the less than 1 percent currently earned from SMIF. Over the next two decades, this supplemental payment will save the state an estimated $11 billion in payments to CalPERS and lower the annual contribution to the fund by an average of 2.1 percent of payroll. The costs associated with the payment will be repaid with Proposition 2’s (rainy day fund) dedicated revenues for long term liabilities.

This proposal and the others in the May revise will now go through review by state legislative budget subcommittees leading up to the state budget approval deadline – June 15. Here is the Governor’s press release from yesterday with a link to the full May revise."


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CalPERS Expects 5.8 Percent Annual Investment Return, Significantly Lower than the 7 Percent Goal

Posted: 2/10/2017 Tags: benefits legislation pension policy retirement Tags Views: 1699

On February 7, 2017, CalPers announced they anticipate a 5.8 percent annual investment return. In our article from December 2016, ACSS provided information about CalPers lowering the discount rate from 7.5 percent to 7.0 percent. CalPERS predicts this lower estimate of 5.8 percent could reduce the portfolio’s more volatile stock and private equity sectors and increase allocations of more stable investments. CalPERS expects higher investment returns in the decades to follow.

Don Boyd, fiscal studies director at the Rockefeller Institute of Government, says “It requires a rosy view of the future to assume a long-run return on 7 percent while expecting to earn only a 5.8 percent in the first 10 years. But the alternative would require raising government contributions by even more than they have increased already, undoubtedly an unpopular and difficult move.”

>> Read the full article from Reuters here.


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Pensions in the News

Posted: 11/4/2016 Tags: benefits pension retirement Tags Views: 2176

ACSS fights to protect your pension and to provide members with relevant news for excluded state employees in regards to pension protection. Below are some informative and insightful recent publications that report on the current pension protection issue in California:

Jerry Brown touted his pension reforms as a game-changer. But they’ve done little to rein in costs
(October 28, 2016 - LA Times)

Generous pensions: Will the courts give government a way out?
(October 30, 2016 - San Jose Mercury News)

Marin ‘pension spiking’ appeal draws national attention
(October 30, 2016 - Marin Independent Journal)


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