Court Ruling on Effective Date of 2005 Benefit Changes

Date: Jul 22, 2010

 

A recent decision by the San Diego Superior Court has ruled that benefit changes made by the City in 2005 – but which were not codified by ordinance into the Municipal Code until 2007 – have a retroactive effective date back to July 1, 2005.

Background

In 2005, the City negotiated labor agreements and entered into various memoranda of understanding (MOUs) that eliminated specific benefits for new employees hired on or after July 1, 2005. The four specific benefits eliminated for those Members were:

  • Participation in the Deferred Retirement Option Plan (DROP)
  • 5-year Purchase of Service Credit
  • 13th Check
  • Retiree Health benefits

The benefit changes, however, were not enacted into the Municipal Code until January 17, 2007, to be effective 30 days later, on February 17, 2007. 

SDCERS is required by law to follow the language in the Municipal Code. From July 1, 2005 through February 16, 2007, however, the Municipal Code had not been updated to reflect these changes. Therefore, the SDCERS Board made the determination that new Members hired during this time – approximately 1,000 people – were still eligible for the four benefits noted above.

What’s Next

On July 8, 2010, the court stayed the enforcement of the judgment in this case, and ordered the City to give notice to all class members. Any required changes to the City’s actuarial valuation will be calculated by SDCERS’ actuary. Members hired on or after July 1, 2005 will not be eligible for the four benefits listed above.  In these cases, SDCERS will be required to rescind any 5-year purchase of service credit contracts entered into by affected Members and return the purchase price plus interest to the Member. SDCERS would also need to rescind any DROP contracts, 13th Check and Retiree Health benefits, and make the corrections as necessary

It is SDCERS’ policy to follow the Municipal Code, as courts have found that SDCERS is not required to follow MOUs.  Historically, SDCERS has followed Municipal Code changes prospectively upon their adoption, and that has been found acceptable to the courts until this latest Superior Court ruling.  Applying benefit changes retroactively creates confusion for all parties, and SDCERS will continue to work with the City to ensure any future benefit changes are done prospectively.




Document Under Categories: 13th Check and Corbett, DROP, Health, Purchase of Service (PSC)

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