Contra Costa County judge rules that Merced County's vacation payouts in 2000 were unlawful

rgiwargis@mercedsunstar.comNovember 20, 2013 

— A Contra Costa County judge ruled recently that Merced County was not acting within the law when it granted a 160-hour vacation payout to its retirees in the year 2000.

The ruling on Friday is one piece of a multiple-phase lawsuit over whether Assembly Bill 197 is constitutional. The law, which excludes terminal cash-outs from counting toward employee pensions, was part of a legislative effort to curb spiking, or inflating, of pensions.

The latest ruling doesn’t answer the question of constitutionality, nor does it change the pensions of current retirees, said Chief Deputy County Counsel Michael Calabrese.

“The (county) retirement system is not taking a position on that ultimate question,” Calabrese said, noting that people who retire today will still receive the 160-hour benefit. “Nothing has changed that is going to affect people right now.”

According to court documents, the Merced County Employees Retirement Association responded that the law at the time allowed it the “discretion” to include those amounts as earnable and final compensation.

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 and others reached their own settlements. Merced County’s settlement granted the 160-hour payout in 2000.

However, a new law signed by Gov. Jerry Brown in September 2012 changed the way pension benefits are calculated. AB197, which took effect Jan. 1, excluded any terminal cash-outs – lump sums paid when employees are terminated, quit or retire – from being counted toward employee pensions.

Employee unions from several counties, including Merced, filed lawsuits claiming the law was unconstitutional. The state consolidated similar cases that were pending in Alameda, Contra Costa and Merced Counties, according to court documents.

“The ruling we got Friday (Nov. 8) is a good step toward clarifying the law, but there are a lot of things still to be resolved,” Calabrese said.

The Contra Costa judge intends to have the entire case resolved before the end of the year, Calabrese said, which would give the county’s retirement board direction about how to handle these type of benefits in the future.

Current and future retirees will keep the 160-hour benefit because a stay order was issued by the court, which means the county doesn’t have to follow AB 197, Calabrese said, and if the law is declared unconstitutional, retirees will continue getting the benefit.

But if the law is upheld, Calabrese said, workers can only count toward their pension “earned and payable cash-outs” from their “final compensation period” – usually the last year of employment. In some cases, the final compensation period might be the last three years of employment, Calabrese said.

Sun-Star staff writer Ramona Giwargis can be reached at (209) 385-2477 or rgiwargis@mercedsunstar.com.

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