| SAN FRANCISCO, April 11
SAN FRANCISCO, April 11 A California appellate
district court ruled unanimously on Tuesday to dismiss a lawsuit
brought against the city of San Diego by the state's Public
Employees Relations Board.
The decision upholds Proposition B passed by San Diego
voters in 2012 that replaced defined benefit pension plans for
newly hired public employees, except police officers, with
401(k)-style defined contribution plans.
San Diego Mayor Kevin Faulconer tweeted on Tuesday that the
court had "protected the clear will of voters and upheld pension
Public workers in California and across the nation typically
receive a "defined benefit” pension plan, that leaves the city
or other governing municipality on the hook to pay the
retirement benefit if invested contributions do not grow to the
defined benefit amount.
A 401(k)-style plan, on the other hand, is called “defined
contribution” plan and does not guarantee a particular benefit
amount, leaving the city with no risk.
The appellate court's ruling potentially saves San Diego
millions of dollars that it could have been forced to spend
creating pensions for roughly 2,000 workers hired since 2012.
Michael Sweet, partner at Fox Rothschild, said this legal
fight is ending with a whimper.
"Certainly if the court had gone the other way, it might
have taken some of the wind out of the sail of pension reform
efforts," said Sweet. "But it isn't a grand ruling on the
questions that are still out there: Under what circumstances, if
any, can changes be made to pension plans of existing public
California has long been a battleground for the fight over
public pension reform. The largest debt for most California
cities and counties is pension liability. Pensions were also a
significant factor in the recent municipal bankruptcies of
Vallejo, Stockton and San Bernardino, but pensions were not cut
in those cases.
(Reporting by Robin Respaut; Editing by James Dalgleish)