For the past 95 years, pension have been the sacred cows of California law. No one has successfully challenged them because of three words in a Supreme Court decision: “in a sense.”
The case from 1917, the court decided that vested benefits were “in a sense” the same as unbreakable contracts, a precedent that has not been successfully challenged. Since. That’s why in San Diego implemented the new 401(k) plan for new hires, but did not change already earned benefits. And the precedent has extended wider than just California, but is known elsewhere as the ‘California Rule.’
The California Rule will certainly be investigated once more as court cases against San Jose’s Measure B make their way up the chain. The reduction of the benefits formula for current employees is too direct of a question to be gracefully parried by courts. It is possible that the three word rule may be narrowed or refined by it reaches its centennial anniversary.
From the Voice of San Diego:
As it stands in California law, on the day municipal workers start their jobs, their pension benefits can only go up, not down.
This legal principle has been a bedrock behind the city of San Diego’s decade-long pension drama. Despite a growing pension debt that has dominated the city’s political discourse, reforms have focused on new employees, not the retirees or current workers who are owed the bill.
It’s one reason why the June pension initiative, Proposition B, stuck new workers with 401(k)s, yet did nothing to guarantee San Diego’s existing pension debt would be cut.
Read the full article here.