The first California retirees to lose a cut of their pensions because of financial mismanagement by a local government are suing CalPERS in a bid to force the $350 billion fund to restore their income.
The three retirees from the tiny Sierra County town of Loyalton filed their lawsuit in September, nine months after the city cut off a supplemental payment it had been giving to them since the California Public Employees’ Retirement System slashed their pensions in late 2016.
“We haven’t got paid a dime,” said John Cussins, 57, who worked for the city for more than 20 years.
The lawsuit, filed in Sierra County Superior Court, alleges CalPERS and Loyalton negligently defaulted on their obligations to fund pensions promised to the retirees.
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CalPERS’ November 2016 vote to reduce the benefits it pays to Loyalton’s handful of retirees startled retired California government workers. It demonstrated that they, too, could lose retirement income if their employers failed to keep up with their pension bills.
A CalPERS survey in early 2017 captured that anxiety when current public employees and local government executives each expressed less confidence in the security of their retirement plans.
“You’re looking at your retirement and you’re seeing CalPERS is reducing pensions, which is something that had never happened before,” CalPERS board member Richard Costigan told The Sacramento Bee in March.
Loyalton is one of hundreds of California cities that contract with CalPERS to provide pensions for their employees and retirees. CalPERS invests money from the cities to fund the retirement plans, and distributes benefits to retirees.
In March 2017, CalPERS reduced pensions for almost 200 more former local government workers when the Los Angeles County organization that employed them also defaulted on its retirement bills.
Loyalton in 2013 stopped paying its pension bills. CalPERS a year later sent the city a notice declaring that Loyalton had defaulted on its obligations and would have to pay $1.7 million to fully fund the pensions of its retirees.
Loyalton didn’t pay. The CalPERS Board of Administration in November 2016 voted to shift money that had been earmarked for the Loyalton pensioners into a low-risk fund and reduce the value of their benefits by about 60 percent.
Loyalton through 2017 made up the difference between what the retirees received from CalPERS and what they were promised. Minutes from city council meetings that year show the payments cost the local government about $5,000 a month.
That arrangement ended in January, Cussins said. “I had to do something,” he said, referring to his decision to find an attorney and sue CalPERS.
Longtime city employees Patsy Jardin and Donald Yegge joined him in the lawsuit.
“The city simply didn’t fund CalPERS, and as a result my clients are getting screwed,” said their attorney, Seth Wiener. “Between them collectively they put in 100 years of dedicated service.”
CalPERS declined to comment for this story. An attorney representing Loyalton did not respond to a request for comment.