Merced County employees rescind retirement after law change

01/14/2013 4:40 PM

01/15/2013 12:54 AM

A handful of Merced County employees who applied for retirement to retain a 160-hour payout have rescinded their decision, according to the Merced County Employees' Retirement Association.

Plan Administrator Maria Arevalo said seven of 40 county employees who applied for retirement in December revoked the applications.

Two employees are undecided.

The number of retirements spiked after Assembly Bill 197, which was signed by Gov. Jerry Brown in September and took effect Jan. 1, changed the way pension benefits are calculated. Specifically, the new law excluded any terminal cash-outs -- paid when employees are terminated, quit or retire -- from being counted toward employee pensions.

Based on the new law, the association in an October newsletter advised employees to retire before Dec. 31 if they wanted to receive their promised 160-hour "terminal vacation" payout.

The 160-hour benefit stems from a 1997 California Supreme Court decision in Ventura County that addressed whether terminal cash-outs could be counted toward employee pensions. Some counties went to trial; others reached their own settlements. Merced County's settlement granted the 160-hour payout in the year 2000.

The 160 hours represents the maximum vacation time an employee can earn or accumulate in one year.

"When the new legislation passed, we let the employees know and a number of people did submit their application for retirement," Arevalo said.

Fresno-based attorney Barry Bennett, however, said the move by the employees' association was unconstitutional and filed a lawsuit on behalf of two employee organizations -- the American Federation of State, County and Municipal Employees and the Merced County Sheriff's Employees Association.

"The judge was interested in knowing what was going on in other counties where similar issues were being litigated," Bennett said. "And whether the state of California would get involved in the lawsuit."

Although the state didn't get involved with the lawsuit, Merced County Superior Court Judge Donald Proietti issued a preliminary injunction in December, ordering the association not to implement AB 197 and to continue calculating pensions as before.

For those 40 employees getting ready to retire on Dec. 31, the association reached out individually to let them know about the change as a result of the judge's preliminary injunction. "We actually called everybody who submitted an application and asked them if they still wanted to go forward with the retirement," Arevalo said.

Last month's ruling is only a temporary stay order until a Superior Court judge makes a final decision about how to implement the new law. AB 197 won't apply to county employees until 60 days after the decision is made.

Contra Costa, Marin and Alameda counties also are pursuing litigation in connection with the state law, with each association handling it differently.

Arevalo said AB 197 put Merced County's association in a difficult position and they had no choice but to follow the law.

"The (association's) board recognized that dilemma from the very beginning, and that there may be some questions about the employees' constitutional rights," she said. "But the board cannot make a determination on what's constitutional or not; all we're trying to do is implement the law."

Arevalo said five people retired in November, but they were not contacted individually. Communication with them was sent via newsletters, a counseling session and a quarterly retirees' luncheon.

However, anyone who retired after the passing of the law and the communication from October can contact the county to discuss options.

"Anyone who retired was told there might be litigation," Arevalo said. "We did not call the people who retired in November because those retirements were already final. But my guess is that the board would probably want to take a second look at those, and we'd have to consult with our attorneys."

Additionally, a determination would have to be made if the county still had openings for those who retired.

Marci Barrera, human resources manager for Merced County, said there were 24 total retirements in December, but they could be for various reasons unrelated to the state law.

For now, the case is ongoing. The next court hearing is set for Jan. 25 before Judge Ronald Hansen.

Reporter Ramona Giwargis can be reached at (209) 385-2477 or rgiwargis@mercedsunstar.com.

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