Selected case summaries concerning public employee retirement benefit posted on the Internet by Justia

Selected case summaries concerning public employee retirement benefit posted on the Internet by Justia

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New retirement options offered eligible retirees benefit actuarially equivalent in value to the previous pension 
Lenander v. Dep't of Retirement Sys.,Washington Supreme Court, Docket 92671-9

In 2000, the Department of Retirement Systems (DRS) created a new option for eligible retirees in which the retiree could opt for a pension that would allow a surviving spouse to continue to receive monthly pension benefits at the same amount after the retiree's death. To make this pension actuarially equivalent in value to the previous pension, the DRS provided for a greater reduction in the retiree's monthly benefits.

In 2010, the DRS adopted rules that modified the degree of the actuarial reduction. Appellant Tim Lenander challenged the changes to the reduction, arguing that the changes violated the statutory scheme and impaired his contract right to a lower reduction in his pension payment.

The Supreme Court found Lenander's arguments unavailing, holding that the DRS acted within its authority in amending the survivor benefit actuarial reduction regulations as set forth under former WACs 415-02-380 (2010) and 415-103-215 (2010).

In amending these regulations, the DRS did not violate the contract clause of article I, section 23 of the Washington Constitution. Consequently, the Court held that the DRS did not infringe on Lenander's right to an "actuarial equivalent" survivor benefit, and that Lenander did not suffer substantial impairment to his pension contract rights.

Excluding specified items from the calculation of retirement income to avoid inflating income to increase the employee’s retirement allowance 
Marin Ass'n of Pub. Employees v. Marin Cnty. Employees Retirement Ass'n., CaliforniaCourt of Appeals, Docket A139610

To combat the practice known as “pension spiking,” by which public employees use various stratagems to inflate their income and retirement benefits, the County Employees Retirement Law, was amended, effective 2013, to exclude specified items from the calculation of retirement income. The trial court concluded application of the new formula to current employees did not amount to an unconstitutional impairment of the employees’ contracts. The court of appeal affirmed, holding that the Legislature did not act impermissibly by amending Government Code section 31461.

While a public employee does have a “vested right” to a pension, that right is only to a “reasonable” pension; it is not an immutable entitlement to the most optimal formula of calculating the pension.

The Legislature may, prior to the employee’s retirement, alter the formula, thereby reducing the anticipated pension, as long as the modifications do not deprive the employee of a “reasonable” pension. The Legislature did not forbid the employer from providing the specified items to an employee as compensation, only the purely prospective inclusion of those items in the computation of the employee’s pension.