It’s a retiree’s worst nightmare: facing a massive pension cut when it’s far too late to do anything about it.
The Mercury News reports that after an agency stopped making payments on workers’ retirement benefits, more than 170 former employees of the East San Gabriel Valley Human Services Consortium, known as LA Works, saw their pensions cut by the CalPERS board by an average of 63 percent.
According to the report, the now-defunct LA Works job training agency had stopped contributing to former employees’ pensions in more than a year when, back in January, the California Public Employees' Retirement System notified more than 170 former employees of LA Works that their pensions could be reduced because of the lack of payments.
LA Works, the report says, “was formed as a joint powers authority in 1979 by the cities of West Covina, Azusa, Glendora and Covina. In 2014, the agency laid off employees and shut its doors after Los Angeles County took away its funding amid a billing dispute.”
It adds, “The agency stopped paying CalPERS its monthly contribution to fund members’ retirement benefits in August 2015 and accrued more than $400,000 in liabilities.”
The pension cuts were approved by the CalPERS board in March and took effect July 1, leaving retirees in their 60s and 70s scrambling to figure out what to do on 63 percent less retirement income. CalPERS officials say in the report that they had to declare the consortium in default and reduce its retirees’ pensions because neither the consortium nor the four cities that created it would pay.
Consortium officials claimed that the cities were not legally obligated to pay for the agency’s debts under its CalPERS contract, and added that the consortium had no funds with which to pay the liabilities. CalPERS figures put the amount to fully fund the former employees’ pensions at around $18 million.
This is only the second time in the history of CalPERS that it has chosen to cut retiree pensions, the report says, adding that “the circumstances that led to the cuts are shared by other retiree groups.”
The scary thing for other CalPERS retirees is that 170 joint powers authorities with similar contracts identify only the agency, and not the municipalities that created them, as responsible for funding members’ retirement benefits. CalPERS spokeswoman Amy Morgan is quoted in the report saying in an e-mail, “CalPERS is in the process of evaluating which contracts might lack language concerning a funding source.”
Both CalPERS and state legislators are seeking alternatives to pension cuts for the retirees of the other 170 joint powers authorities, according to the report. Otherwise they too could join the LA Works retirees in having to cut back on everything from living expenses to vacations and even mortgage payments.
The report relates the predicament of LA Works retiree Sandy Meza and her husband, who has Parkinson’s. The couple have asked their three adult children to pay the mortgage on their home, since the 63 percent cut in Meza’s pension makes it impossible to keep up.
Meza herself, who spent nearly 30 years at LA Works, is looking for a new job, while her husband unsuccessfully appealed to Medicare to cut the cost of his Parkinson’s medications. The appeal was denied.
State Sen. Connie Leyva of Chino, California, a member of the Senate Standing Committee on Public Employment and Retirement, says in the report that she is hopeful legislators can figure out how to restore LA Works retirees’ pensions. While $18 million “is a lot of money,” she’s quoted saying, “what these folks are losing in their daily lives is an even bigger issue. They did what they were supposed to do and now the rug is being pulled out from underneath them.”