Pensions Should Be Based on Bonuses Too, Justices Rule

Thousands of county employees in California are entitled to higher pensions based on bonuses that they are paid for such things as education and special skills, the state Supreme Court ruled Thursday.

The unanimous ruling, in a Ventura County case, could increase individual pensions 10% to 20% in some cases, said Stephen H. Silver, lawyer for the 700-member Deputy Sheriffs Assn., which filed the lawsuit.

The case will cost the county millions of dollars and affect future negotiations over worker benefits, because “every benefit that is granted will be more expensive,” said Assistant County Counsel Dennis Slivinski. He said the county has more than 5,000 employees, not all of whom get the range of bonuses provided to sheriff’s deputies.

The ruling applies to the 20 counties covered by the County Employees Retirement Law of 1937. A list was not immediately available, but Silver said Los Angeles County and most other Southern California counties were covered. Most of the state’s other 38 counties are part of the Public Employees Retirement System, which already provides similar benefits.

The court said the Ventura County deputies were entitled to increased current or future pensions, but did not decide whether the other 19 counties would have to raise the pensions they have already calculated or would be affected only in the future.

The pensions are determined by taking an employee’s highest annual compensation and using a percentage that depends on retirement age and years of service. The issue in the case was whether the compensation included bonuses paid to some employees.

The deputies in the case received extra pay for bilingual skills, uniform maintenance, riding motorcycles, working as training officers, and for some holiday and vacation periods for which they chose cash instead of time off.

A Superior Court judge and the 2nd District Court of Appeal ruled that those sums were not included in compensation for pension purposes. They relied on a 1983 appellate ruling that said compensation was the amount paid to all employees in the same job. But the state’s high court said the 1983 ruling was wrong.

Compensation is “the average monthly pay, excluding overtime, received by the retiring employee,” said the opinion by Justice Marvin Baxter. He said it includes additional pay for special skills, experience and the other bonuses received by the deputies.

In a partial setback for the employees, the court said the county’s contribution to a deferred-compensation plan is not included in the pay level on which the pension is based. But Silver and Slivinski said those amounts were much less than the benefits awarded in the ruling.

“The public policy question is to what extent retirement benefits should be equivalent to actual salary,” said Slivinski, the county’s lawyer. “It’s been the interpretation of the [county] retirement board since [the 1983 ruling] that retirement is not supposed to include all the cash compensation that an employee receives. This opinion radically changes that.”

That is a fair result, said Silver, because “the whole idea of a pension is to maintain to a certain extent what you’re accustomed to live on.”