Bill Protecting Retiree Financial Security Passes Senate

SB 1124 Prevents Post-Retirement Benefit Cuts Due to Employer Errors

Wednesday, May 30, 2018

SACRAMENTO – Today, the California State Senate approved passage of legislation authored by Senator Connie M. Leyva (D-Chino) that protects the retirement security of California Public Employees’ Retirement System (CalPERS) members by ensuring that any collectively-bargained compensation agreed to by their employer cannot be reduced during retirement as a result of incorrectly reported compensation by employers.

In some cases, employers have incorrectly reported retired employee information to CalPERS. In these instances, employers incorrectly calculate and report an employee’s pensionable compensation for retirement purposes. When these mishandlings of information occur due to employer error, the retired employee is ultimately required to pay back the overpaid amount and suffer a permanent reduction in future payments.

“SB 1124 will help to protect the retirement security of retirees by making sure that they are not unfairly forced to pay money back or suffer reductions to their future payments due to employer accounting or reporting errors. These retired public servants oftentimes rely on fixed incomes and should not be required to take unexpected cuts to their benefits, sometimes years after they have retired,” Senator Leyva said. “After decades of public service, these retirees deserve to have peace of mind in knowing that the monthly pension benefit promised to them will not be cut mid-retirement for something they did not know nor had control over.”

For example, after serving the public for nearly 30 years, a firefighter employed by a CalPERS contracting agency decided to retire. Prior to retiring, the firefighter requested an official retirement estimate from CalPERS, which provided a projection of retirement benefits as of the firefighter’s estimated retirement date. Nearly five years after retirement, CalPERS notified the retired firefighter that her employer had incorrectly reported certain compensation which CalPERS believed was not pensionable compensation. CalPERS then sought to collect the overpayment reimbursement not from the employer, but from the retired firefighter. The reimbursement sought by CalPERS included a lump sum amount of $42,000 and a substantial future reduction in the retired firefighter’s monthly retirement allowance.

Sponsored by the California Professional Firefighters and supported by the Laborers’ International Union of North America / Local 792, Peace Officers Research Association of California and Riverside Sheriffs’ Association, SB 1124 will next be considered by the California State Assembly.