Why is the new ruling in California against the ‘increase’ of pensions?
A California appeals court has upheld a decision that government workers are not allowed to increase their pensions. This means lost income for retirees.
A California appeals court last week upheld a decision by the Ventura County Employee’s Retirement Association to reverse a benefit that had allowed government employees to increase their pension contributions.
The appeal court’s decision is in keeping with the California Supreme Court decision in 2020 to uphold a law enacted by then-governor Jerry Brown called the Public Employees’ Pension Reform Act. This law, also referred to as the pension limit law, sought to restrict certain forms of bonus payments and overtime when calculating the future pension of workers.
The practice of ‘pension spiking’
The measure aimed to combat the practice of “pension spiking”, which refers to artificially inflating benefits upon retirement by making use of sick leave days or racking up hours of overtime shortly before retiring.
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As a result of the recent decision, thousands of retired employees in Ventura could lose hundreds of dollars in monthly retirement income as the county’s retirement fund complies with pension law.
The board’s vote means that the changes would be retroactive to 2013, which would affect county employees who have retired since that time.
Brown’s law instituted pension contribution caps
When the state supreme court upheld Brown’s law in July 2020, California’s county-run pension funds were ordered to abide by it. The measure changed pension formulas, resulting in reduced potential retirement income for government workers who were hired after the law was passed.
Since the court’s decision in 2020, county pension funds have been calculating the effect of the reform act on pensioners, and the adjustment process is still not finished in the case of some counties. Some retired workers have been getting back their money because they made contributions for benefits they will not be able to receive.