California pension mistakes would cost cities — not retirees — under proposed law

Retired California public employees who have received extra retirement income by mistake could be protected from having their pensions reduced under a proposed state law.

The proposal targets the mistakes public employers such as cities and schools sometimes make when they calculate workers’ pensions. The California Public Employees’ Retirement System periodically reviews the payments to make sure they’re in compliance with the state’s complex retirement laws.

Under current law, when CalPERS determines it is paying a retiree too much, the retiree loses the difference, and can be held responsible for paying back up to three years’ worth of mistaken payments.

Senate Bill 266, sponsored by Sen. Connie Leyva, D-Chino, would put the burden of paying for those miscalculations on the public employers.

Some former firefighters have found out up to five years into retirement that the pension they had planned on would be reduced, said Carroll Wills, a spokesman for California Professional Firefighters, a labor organization representing state, local and federal firefighters. In some cases, the retirees have been billed for thousands of dollars to make up for the mistakes, Wills said.

“We don’t think the blameless retirees, who were already retired and living on a fixed income, should be the ones who are made to pay the price for a mistake that was made either by a local agency or by the pension fund,” Wills said.

Some local governments have opposed the bill, saying cities and school districts that are already struggling to pay pension debts would have to shoulder new obligations.

“SB 266 would require cities and other local agencies to use taxpayer dollars to pay for pension overpayments that the state’s retirement system has determined to be illegal,” Dane Hutchings, a lobbyist representing the League of California Cities, said in a prepared statement. “How can local officials justify to their taxpayers that they are the ones who have to write a check to rectify these overpayments — not only to retirees but their beneficiaries.”

Former Gov. Jerry Brown vetoed a similar bill Levya introduced in the last session. In a veto message, Brown said he feared the change could enable pension spiking — the practice of finding ways to boost pay in the last years of employment to increase pensions in retirement.

“Before changing the law in the way that this bill does, I encourage the Legislature to develop policies to prevent such errors in the first place,” Brown said in his veto message of the bill. “Such policies might include requiring CalPERS to review and approve any proposals for pensionable compensation in a memorandum of understanding before the memorandum is finalized.”

Senate Bill 266 originally incorporated Brown’s suggestion. As introduced, it would have required CalPERS to review public agencies’ new benefit agreements to make sure they comply with the state’s complex Public Employees’ Retirement Law. In calculating retirement benefits, public employers have to incorporate a host of pay categories for things like having an advanced degree or speaking multiple languages into a worker’s pension, which at its core is based on years of service.

Under the original bill, if CalPERS certified new benefits and then later determined the benefits were improper, the retirement fund would be responsible.

That provision was softened along the way, replaced with language saying that public agencies can request that CalPERS check whether new benefits are “consistent” with retirement law, removing the legal responsibility the earlier version assigned to CalPERS.

CalPERS had no official position on the bill as of Aug. 21, when the CalPERS Board of Administration last received an update on it.

The proposal cleared the Senate in May and could be up for final votes next week.

Related stories from Merced Sun-Star