Pension Plans: Many County Employees May Be Entitled To Higher Benefits

Several counties, and possibly other public employers as well, may soon be paying out a lot more in retirement benefits. The reason is a new decision by the state Supreme Court that said a Southern California county improperly excluded certain cash payments when calculating pensions under the County Employees’ Retirement Law.

Retirees File Suit

In addition to their base pay, some Ventura County employees receive other compensation such as bilingual premium pay, a uniform allowance and educational incentive pay. The County, however, failed to include these payments when computing employee earnings for the purpose of determining their pension benefits.

Several retired workers and a county employee association sued. They argued that all of these extras were supposed to be in the calculation and, therefore, they were entitled to a boost in their pensions. The County contended the law only required it to count the employees’ base pay.

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Cash Payments Are Compensation

The Supreme Court found the additional payments should have been included. With few exceptions, all types of monetary compensation must be counted in determining the amount on which an employee’s pension will be based, according to the Court.

What This Case Means To You

The Court made it clear its ruling only involved Ventura County, and declined to say whether the decision will also apply to other counties covered by the County Employees Retirement Law (CERL). But Robert A. Blum, an attorney and principal in the San Francisco office of the employee benefits consulting firm William M. Mercer, Inc., told CEA that Ventura County’s policy of excluding payments other than base wages is a common practice.

Consequently, it is likely the 19 other CERL-covered counties will be required to increase future pension plan payouts. Plus, other public em- ployers with similar retirement programs who don’t participate in the Public Employee Retirement System (PERS) could be affected as well. (Counties that participate in PERS already include this extra compensation.)

Blum also notes that there are several unsettled questions including whether counties covered by CERL will be required to make retroactive contributions for employees and retirees. In any event, this new ruling is expected to translate into significant new financial costs and administrative burdens for many county employers.