California’s Public Employment Retirement System (PERS) bases retirement benefits in part on an employee’s “compensation” or “compensation earnable.” PERS is then funded by the employer and/or employee contributions calculated on the percentage of the employee’s “compensation” or “compensation earnable.”

In 1975, through the collective bargaining process, the City of Culver City, California agreed to pay PERS contributions of police officers. This additional compensation, referred to as “EPMC” or “Employer Payment of Member Contributions” was designed to increase the employees’ “compensation earnable,” which would in turn increase the employees’ pensions on retirement. The City recorded the EPMC to PERS as “compensation earnable” and it funded all retirement contributions calculated on a base amount, which included the entire EPMC.

In 1991, the City discontinued the practice of reporting the EPMC to PERS as “compensation earnable.” The City’s actions were based upon an opinion from the State Controller’s Office that inclusion of EPMC in “compensation earnable” violated the law.

In 1994, the Legislature amended the PERS statutes to authorize the inclusion of EPMC as part of “compensation earnable.”

In spite of the statutory change, the City continued with its practice of not including EPMC in reported “compensation earnable” and continued failing to include EPMC in the calculation of retirement benefits. In 2005, a group of 50 retirees, including former police officers and firefighters, brought a lawsuit against the City, alleging that the City should have included EPMC as “compensation earnable” for the three-year time period immediately preceding the filing of the lawsuit. The California Court of Appeals dismissed the lawsuit.

The Court found that the time to have filed the lawsuit was in 1994, when the Legislature changed the PERS statutes: “To the extent the plaintiffs allege the right to the pension benefits at issue is based upon statute, any such claims are subject to the three-year statute of limitations. Plaintiffs’ cause of action based upon the statutory entitlement to the pension benefits accrued on July 1, 1994, when the Legislature enacted the statute expressly sanctioning the practice of including EPMC as part of ‘compensation earnable.’ Because the plaintiffs filed this action to establish the statutory right to the pension benefit in 2005, it is untimely.”

Cooke v. City of Culver City, 2008 WL 683928 (Cal.App. 2008).

This article appears in the June 2008 issue