On September 10, 2012, Governor Brown signed the Public Employees’ Pension Reform Act (“PEPRA”), which mandated certain limits to pension rates and contributions for new and existing employees. PEPRA altered the landscape for pensions for public sector employees and will continue to be the subject of litigation as the fight over vested pension rights continues.

In one of the first but certainly not the last decisions on the impact of PEPRA to negotiated pension rights, the Court of Appeal ruled last week on the San Diego Deputy Sheriffs’ Association (DSA) challenge to the application of PEPRA to certain members. Those individuals started employment on or after PEPRA’s effective date (January 1, 2013). The DSA argued that these new hires had a vested right to the terms of the bargaining agreement already in effect prior to January 1, 2013.

In a blow to the DSA (and anyone hired after January 1, 2013 in the State of California), the court determined that those employed on or after PEPRA’s effective date do not have a vested right to the terms of the agreement. The court relied on precedent holding that where a collective bargaining agreement incorporates statutorily available retirement plan options and the legislature has not restricted itself from changing those options at a later date, new hires have no vested right to the pre-amendment terms.

The DSA nonetheless prevailed as to the increased rate of employee contributions because PEPRA forbids the application of increased contribution rates to new hires while prior agreements with lower rates remain in effect.

Comment: The main takeaway is that PEPRA controls the pension rights of public sector employees hired after January 1, 2013, even if there is a bargaining agreement in place that dictates different terms. The fight over PEPRA will continue, and we will continue to update you as it unfolds. 

If you have any questions, please contact Jennifer Stoughton at jennifer@majlabor.com.