ARSC
 
What This
Lawsuit Is About
See If you might have
a Claim against CalPERS
Examples

Examples of CalPERS Members Who May Get
Little or None of the Value for the Air Time or
Other Service Credit That They Bought

Overview

Our lawsuit argues that if you buy air time, military time or similar service credit and later get disabled, you are entitled to (1) your full disability retirement pension set by law plus (2) the full benefit of the air time or other service credit that you bought.

CalPERS, however, often denies members these full benefits. The examples below cover three different situations:


Members Who Are Younger Than 50 and Qualify for an Industrial Disability (IDR):

A CalPERS member who is under the age of 50 at the time of his or her retirement for an IDR is not eligible to take a service retirement. CalPERS will pay only an IDR allowance (in most instances 50% of final compensation). Anyone who bought air time or any other similar service credit and then took an IDR is getting nothing for his or her investment.

Members Who Are Eligible to Retire and Who Qualify for an IDR:

A CalPERS member who is (i) at least 50 years of age; (ii) meets the other criteria for eligibility to take a service retirement; (iii) who purchased air time or similar service credit; and (iv) then suffered an industrial disability, may receive little or none of the value the member thought he or she was buying. Look at these four hypothetical CalPERS members, all 56-year-old employees of a local police department with a CalPERS "2% @ 55" retirement plan:
  • Full Benefits: The first member has 22 years of service credit and never bought air time or similar service credit. He would be entitled to an IDR at 50% of his final compensation, even though his service retirement allowance would have been 44% (22 years x 2% = 44%).
  • Partial Loss: The second has the same 22 years of service but also bought 4 years of military time. He would end up with a total of 26 years of service credit (22 for his years on the job plus the additional four years of military time). He would be entitled to take a service retirement with a pension of 52% of his final compensation (26 years x 2% = 52%), with the first 50% categorized as IDR. However, he bought 4 years of military time, anticipating an 8% increase in his retirement pension (2% more of his final compensation for each of the 4 years of military time under his "2% @ 55" plan). Instead, CalPERS would pay him only 2% over and above what he would have been legally entitled to under the IDR statutes. In other words, CalPERS is paying him only 1/4 of the value of his purchase of military time and CalPERS reduces or seizes 3/4 of the value he contracted for simply because he is also entitled to an IDR.
  • Total Loss: A third member has 16 years of service credit but also bought an additional 5 years of air time. She would end up with a total of 21 years of service credit (16 for her years on the job plus the additional 5 years of air time). Her service retirement would be only 42% of final compensation so she would take the 50% IDR allowance. That means she bought the 5 years of air time at considerable cost and received nothing for it. She would automatically be legally entitled to receive the 50% IDR, but CalPERS would pay her nothing for the air time she bought.
  • Complete Credit: A fourth member has 28 years of service and also bought 3 years of Peace Corps time. He would end up with a total of 31 years of service credit (28 for his years on the job plus the additional 3 years of Peace Corps time). His service retirement would be 62% of final compensation. That means he would be the only person in these examples who would receive full value for the purchased service credit.
Top  

Members Who Qualify for a Regular Disability Retirement

At this time, A CalPERS member on regular disability does not qualify as a class member in this action, Please check back again in the future.


Top

Installments Paid

If the ARSC or PVSC will not increase a member's retirement allowance, the member can elect to terminate his or her purchase contract and stop prospective payments. (Government Code, §§ 21037 and 21039.)

However, CalPERS indicates that installment payments already made cannot be refunded.

The lawsuit requests in the alternative that CalPERS either (i) provide an additional annuity above the disability allowance which is funded by the installments already made; or (ii) allow rescission of the purchase contract and restitution (i.e. repayment or refund) of the amounts that have been paid because CalPERS failed to notify class members that no additional ARSC or PVSC benefit would be paid in certain circumstances.

In many cases where the member would receive a greater service retirement allowance, CalPERS will require the member to pay the installment contract in full. CalPERS may require all installment payments even if the increased retirement benefits over the course of the member's lifetime is minimal or the "break even" point is far into the future.

Lump Sum Paid

Assuming that CalPERS takes the position that there may be no refund of installment payments prior to the member's election to terminate the installment contract, the statutes do not forbid the refund of lump sum or roll-over monies. (Government Code, §§ 21037 and 21039.) Seizure and forfeiture statutes should be narrowly construed.

Disclaimer: This web site is provided for informational use only. It is not legal advice. Your use is acknowledgement that you have read and agreed to the terms and conditions.