Are Public Pensions a "Vested Right"?

Via Pension Pulse.

Chris Panteli of Global Pensions reports, Public pensions a "vested right", CalPERS report finds:

Legal
analysis carried out by the California Public Employees’ Retirement
System (CalPERS) has ruled that pension promises made to current and
retired members are a “vested right” and protected under State and
federal laws.

The
analysis, "Vested Rights of CalPERS Members," articulates provisions
found in the contract clauses" of State and federal laws, concluding
that the laws establish that public employee retirement benefits are a
form of deferred compensation and part of the employment contract.

"The
law is very clear - a promise of a pension made by a public employer
to its employees is a promise the employer must keep," said Anne
Stausboll, chief executive officer for CalPERS.

"We prepared this
analysis for two reasons. First, to reaffirm the provisions of the law
regarding the nature of our members' pension rights; and second, to
outline CalPERS roles as fiduciaries and stewards of the pension fund.
We need to ensure that our members' vested rights are honoured."

CalPERS
analysis looked at more than a dozen California appellate cases over
the last 70 years and identified several rules which have emerged from
court decisions, including:

• Employees are entitled to benefits in place during their
  employment, meaning they obtain a vested right to the provisions of the
  applicable retirement law that exists during the course of their
  public employment.
• RRetired and inactive members have vested rights to the benefits promised to them when they worked.
• Employees are entitled only to amounts reasonably expected from
  the contract. Vested rights protection does not extend to unreasonable
  or unanticipated windfalls.
• The State's "emergency" powers are extremely limited and cannot
  be used to reduce the benefits that have been promised. The State's
  emergency powers do not enable it to solve its budgetary problems by
  eliminating or reducing the long-term benefit promises it has made.
• Future employees have no vested rights.
• Only lawful contracts with mutual consideration are protected by the contract clause.
• Active employees' vested rights may be unilaterally modified only under extremely limited circumstances. Modifications
  must be reasonable and must bear some material relation to the theory
  of a pension system and its successful operation. Changes that result
  in disadvantage to employees generally must be accompanied by
  comparable new advantages.

The report added if a pension
reform proposal for current employees were to be enacted it would still
have to "pass muster" under the Contract Clause of the California
Constitution. If a proposed amendment eliminated the State
Constitution's Contract Clause, the Contract Clause in the US
Constitution would still give rise to the same protection of vested
rights as the State Constitution.

"The assumption by authors of
pension reform proposals that amending the State Constitution will
avoid a constitutional challenge to altering vested retirement benefits
is misplaced," said Peter Mixon, CalPERS General Counsel.

"Without
consideration of State and federal rules, well-intentioned proposals
may only lead to increased litigation and administrative costs that
will further increase the costs of providing benefits."

You can download the CalPERS' report by clicking here.
There is no question that retired, inactive and active members have
more "vested rights" than future employees. They paid into their
pensions, contributed part of their wages, and expect their employer to
deliver on the pension promise. Having said this, when the money runs
out, like it did in Greece, all bets are off and even if these "vested
rights" are protected under the Constitution, the government can turn
around and cut benefits and repeal all vested rights.

In other
words, when it comes to pension benefits, public sector employees have a
lot more protection under the law than their private sector
counterparts but anyone who thinks that these "vested rights" are
immutable and enforceable under any circumstance is simply deluding
themselves. When catastrophe strikes, the only "vested right" you have
is the right to survive as best as you possibly can. If the money runs
out, you will see deep cuts in your pensions.

Comments

[hannah]

so when the federal gov takes are money for social security but the supreme court rules soc sec is just a tax and we dont have a right to any retirement....why are state employees different?

more pr bailout bs propaganda......

[ATM]

Income taxes don't vest you in any benefit payments from the government because those payments are fungible money that the gov can and does spend on anything it wants.

Pension contributions are held and invested in trust for the recipients (supposedly). That's the difference. All Al Gore lock box BS aside, SSI is nothing but another revenue source for gov as a whole.

Pensions will have their own problems as the graft, misallocation and mismanagement become more well known. I asssume I will see the pension advisors hang along with the union bosses who have raped these things for decades, but I've been surprised before. 

[tgatliff]

I wouldnt bet on bankers and insiders not being equally screwed.   When the current system finally comes apart (and it will), then most bank employee jobs will not exist anymore.  Also, those retired bankers will be left with an angry public bent on revenge.   Dont think for a moment that in the next 10 years people like Paulson, Mozilo, and even Geithner would not pay at least some criminal recourse.   All it takes is an angry public and an administration looking to please...

[PulauHantu29]

Bankers still receieved massive record high bonuses despite these banks being insolvent for the past two years it says on the Paul Kedrosky's Blog.