Friday, September 28, 2012
City Attorney Contact: (510) 238-3148
City of Oakland prevails in lawsuit against pension board, advises board to stop overpayments to retirees
Judgment will save taxpayers millions of dollars
OAKLAND, CA – A Superior Court judge has ruled in favor of the City of Oakland in its lawsuit to correct millions of dollars in overpayments to retirees in the Oakland Police & Fire Retirement System (PFRS), an old pension system established by voters in 1951 for police officers and firefighters and closed to new members in 1976.
The ruling by Judge Evelio Grillo will eliminate an estimated $3.83 million in annual overpayments to retirees in the PFRS system. The ruling also directs the PFRS Board to recover millions of dollars in past overpayments to retirees since 2008. Elimination of these overpayments will significantly reduce the City’s future obligations to the pension system, thereby saving taxpayers millions of dollars.
This week, Oakland advised the PFRS board to take immediate action to stop overpayments and begin collecting past overpayments as ordered by the court. The Board has yet to comply with the court’s August 10 ruling.
“Retirees under this system deserve to be paid what they are owed,” City Attorney Barbara Parker said. “The purpose of this plan was to pay retirees a decent pension that keeps pace with what current employees make. Unfortunately, the PFRS Board refused to correct ongoing overpayments, so retirees’ pensions were based on an amount that was more than what active police officers make. By restoring payments to the correct amounts, this ruling protects the assets of the pension system and ensures that retirees can continue to collect the benefits they are entitled to.”
Parker also thanked the City Administrator’s Office and the Nossaman law firm for their work on the case.
The City estimates the PFRS Board overpaid retirees by about $11.5 million since 2008. In that year, the police officers’ union agreed to a change in their labor agreement with the City reducing their holiday pay. In the past, when compensation of active officers increased, pension amounts increased proportionally for PFRS retirees (as required under the City Charter). However, when compensation for active officers went down in 2008, that change was not reflected in payments to PRFS retirees – as required under the City Charter.
The City brought overpayment of holiday pay to attention of the PFRS Board, and at a series of Board meetings presented evidence showing significant overpayments to PFRS retirees. However, the Board refused to correct the overpayments, and the City filed a lawsuit on June 14, 2011. The lawsuit presented evidence of overpayments based on both premium holiday pay and “shift pay,” which is extra money that active officers earn to work the graveyard and swing shifts.
Judge Grillo ruled that the PFRS Board violated its duty by distributing excessive pension benefits based on premium holiday and shift pay. The decision will represent major savings for taxpayers by reducing the City’s future obligations to the pension system.
The PFRS Board includes a representative of the Mayor, three community members appointed by the Mayor and three retirement system members elected by PFRS members or their beneficiaries.