Judges’ pension contributions eyed

Payments seven judges make toward their pensions would be cut nearly in half by a bill approved last week in a Senate committee, despite a warning from the chairwoman of a “slippery slope” undermining the governor’s pension reform.

The pension contribution of the judges, who were elected in 2012 but did not take office until 2013 when the reform began, would be lowered from the new-hire rate under the reform, 15 percent of pay, to the rate paid by most judges, 8 percent of pay.

“All the bill does is it treats these seven judges the same whether they were elected or appointed in 2012 and whether they came from private practice or from public law.” —  Mike Belote, California Judges Association.

On their recent salary of $181,292, a seven percent reduction in the annual pension contribution would save each of the seven judges $12,690 a year.

The bill exempting judges elected in 2012 from the Public Employees Pension Reform Act (PEPRA), which was pushed through the Legislature that year by Gov. Brown, only affects a handful of judges who had been working in the private sector.

Other new judges elected in 2012 worked in government and are not covered by the reform that took effect Jan. 1, 2013. Already in public pension systems, they joined the Judges Retirement System as transfers, not as new hires covered by the reform.

“All the bill does is it treats these seven judges the same whether they were elected or appointed in 2012 and whether they came from private practice or from public law,” Mike Belote of the California Judges Association, the bill’s sponsor, told the committee.

“We don’t see it as in derogation of PEPRA,” said Belote. “We believe it is consistent with the spirit of PEPRA that everything after 2013 is treated under the new rules.”

Three of the judges who would have their pension contributions lowered by AB 837 briefly spoke in support of the measure at the Senate Public Employment and Retirement Committee:

Alameda County Superior Court Judge Tara Flanagan, Trinity County Superior Court Judge Elizabeth Johnson and Tehama County Superior Court Judge Mathew McGlynn.

Sen. Norma Torres, D-Pomona, the committee chairwoman, said the author of the bill, Assemblyman Bob Wieckowski, D-Fremont, had talked to her and most of the other committee members in advance of the hearing.

“Personally, I believe that this is a slippery slope,” Torres said. “When it comes to PEPRA, either you support PEPRA or you don’t. There is something to be said about police officers and firefighters who might have also been hired but couldn’t start their (training) classes until some time after. So if we allow judges, then who’s next?”

Two court actions this year show that judges keep a close eye on their own retirement benefits, seeking repayment for groups large and small and in one case pursuing a claim for decades.

A class-action lawsuit filed last January contends judges are owed a pension increase and back pay because their salary, frozen for five years, did not keep pace with average increases in state worker pay as required by law.

The suit filed by the former presiding judge of the 2nd District Court of Appeal, Robert Mallano, cited relatively small increases in average state worker pay during three years as the state struggled during the recession with deficits and deep spending cuts.

As judicial salaries were frozen, said the suit, state workers received average salary increases of 0.97 percent in fiscal 2008-09, followed by increases of 0.21 percent in 2009-10 and 0.22 percent in 2013-14.

In the oldest battle, an appeals court panel last month tossed a suit seeking more than $100 million in unpaid benefits and interest for a group of judges who held office between January 1970 and December 1976.

The suit, filed in March 2012 on behalf of about 125 active and retired judges and their beneficiaries, accused the Judges Retirement System administered by CalPERS of prolonging the battle in the mistaken belief the debt ends with the death of the judges.

The judges contended their benefits were a “vested” right protected from a 1976 cap on salaries and benefits. The appeals panel agreed with a lower court ruling that the claim misread the law, but allowed 10 plaintiffs to argue again under a correct reading.

Whether due to their litigious tendency, the potential conflict of ruling on pension issues that affect their own retirement benefits or other reasons, judges were exempted from the main PEPRA provision giving new state and government hires lower pensions.

New teachers get lower pensions under the reform, and so do new police and firefighters. But new judges continue to have one of the most generous pension formulas, designed for taking the bench later in life and retiring at an older age.

Judge pensions are limited to 75 percent of final pay. But new judges are exempt from a tighter PEPRA cap limiting the amount of pay used to calculate pensions to the maximum wage taxed for Social Security, $117,000 this year.

PEPRA calls for an equal employer-employee split of the pension “normal” cost, the rate for pensions earned during a year excluding the debt or “unfunded liability” from previous years, which is usually due to a shortfall in expected investment earnings.

The only major PEPRA provision judges are not exempted from requires new judges to pay half the normal cost of their pensions — and that’s what the seven judges would be exempted from under the bill approved by the Senate committee last week.

The Judges Retirement System administered by the California Public Employees Retirement System was split into two parts by legislation in 1994, following a report by a select committee appointed by the chief justice.

New judges appointed or elected since Nov. 9, 1994, are in Judges Retirement System II. As of last June 30, JRS II had 95 percent of the projected assets needed to cover future pensions, compared to a 66 percent funding level for state worker pensions.

The employer contribution for JRS II is 24.6 percent of pay, while judges contribute 8 percent of their pay. In an unusual alternative to a pension, judges can choose a refund of their contributions and a portion of employer contributions with interest.

Judges who took office before Nov. 9, 1994, are in the Judges Retirement System with benefits roughly similar to JRS II. The big difference is that JRS is pay-as-you-go with a funding level of 1.6 percent and a $3.3 billion unfunded liability.

The state is expected to make a $217.5 million payment in the new fiscal year for the 2,251 persons in JRS, including 328 active judges and 1,220 retired judges and their beneficiaries.

The bill that created JRS II in 1994, SB 65, repealed a requirement that JRS be fully funded by 2002, expected at the time to cost more than $100 million a year. Now proper actuarial funding of JRS under new accounting rules based on average remaining service time would cost $1.9 billion a year.

CalPERS suggests two more manageable prefunding schedules to lower long-term costs with annual payments of $284 million over 20 years or $458 million over 10 years, according to the latest actuarial report.
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Ed’s Note: Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at Calpensions.com.