California Supreme Court Rules in Cal Fire Case – Round One Goes to the Legislature, But It Ain’t Over

By Jeff Chang

The California Supreme Court recently issued its decision in the Cal Fire Local 2881 v. CalPERS case – the first of six so-called “California Rule” (“Vested Pension Rights”) cases pending before the Court. The California Rule, in essence, states that: “A public employee’s pension constitutes an element of compensation, and a vested contractual right to pension benefits accrues upon acceptance of employment. Such a pension right may not be destroyed, once vested, without impairing a contractual obligation of the employing public entity.” (Betts v. Board of Administration). In what many might characterize as a significant disappointment, there was no “knockout” of the California Rule. In fact, the Court, decided that it could resolve the matter without specifically addressing the California Rule. Nonetheless, the Court ruled in favor of the California Legislature and CalPERS in holding that employees’ right to purchase nonqualified service credit, or “airtime,” was not a right protected by the contract clause of the California Constitution and, therefore, could be altered or eliminated at the discretion of the Legislature. Round one to the Legislature.

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Understanding Public Agency Participation in ERISA Multiemployer Pension Plans

By Jeff Chang

Many California cities and public agencies negotiate with — and reach memorandums of understanding with —  their union bargaining partners on a regular basis. In some cases, these unions are local police or firefighter unions. In other cases, the bargaining units are part of much larger national unions (e.g., SEIU, the Operating Engineers or the Steelworkers). In these latter situations, the public agency often agrees to “participate” in — and contribute to — the multiemployer pension plan maintained by the national union organization. These plans are typically overseen by a joint employer/employee board of trustees. Most people recognize these arrangements as “Taft-Hartley” plans.

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Have You Been Told Lately That You Owe ESRP?

By Jeff Chang and Allison De Tal

Within the last few days, we have received a number of emails and calls from public agency clients stating that the IRS wrote them to demand an Employer Shared Responsibility Payment amounting to millions of dollars. Naturally, our clients are surprised and shocked that they are receiving such demands – especially since they all believe that they are in compliance with the requirements of the Affordable Care Act.

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Lessons From the Private Sector: Takeaways From Recent ERISA Plan Fiduciary and Fee Litigation

By Jeff Chang

This is a blog about “public” benefits issues — one that focuses heavily, but not exclusively, on California developments. If we are focusing on California’s public agency retirement and welfare plans — which are generally exempt from ERISA — why worry about ERISA litigation? We worry, or at least consider ERISA litigation, because the standards of care established for public retirement plan fiduciaries were clearly patterned after those set forth in ERISA. The ballot arguments for Proposition 21, amending the California Constitution and adopted by voters in 1984, state, among other things:

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Recognizing That All “Rates of Return” Are Not the Same

By Jeff Chang

As a “baby-boomer” and one of the millions of my generation getting ready for retirement, I’ve naturally begun to focus more on the ups and downs of the stock market and all of the “advice” regarding how and when the current bull market will correct itself. Admittedly, I am not an investment advisor and this blog is not about handing out specific investment advice. However, I do feel qualified to share a few basic observations about investing practices and behavior that may be of interest and use to participants managing their own retirement investments or plan fiduciaries responsible for ultimate pension or OPEB obligations.

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