City Files Suit Over Retirement Benefits

The city has filed a lawsuit against the state agency that administers public employee retirement benefits, saying a mistake by the agency has left the city liable for $8 million in pensions.

The suit, filed this week against the Public Employees Retirement System, asks that PERS, and not the city, be on the hook for the potential extra benefits to 104 city workers.

PERS, into which cities pay retirement benefits for their employees, said in the 1980s that public employees could roll over compensation for unused vacation time and other benefits to their last year’s salary. That increased the final salary figure that determined the workers’ monthly pensions--a practice known as “pension spiking.”

Because of that, the city negotiated union contracts under the assumption that PERS was billing the cities for the cost of those rollover benefits, said Peter J. Brown, a Los Angeles attorney representing the city in the suit. PERS was not doing so, however, and has since presented a bill to the city for the unfunded liability.

In 1994, the state Court of Appeal ruled that such rollover payments were illegal.

Because of that, and because the city negotiated the union contracts based on PERS’ earlier counsel that rollovers were all right, Huntington Beach officials contend, PERS rather than the city should pay the $8 million into the retirement account.

Mark DeSio, public information officer with PERS, said the agency cannot comment on pending litigation. He did say that no other cities have filed similar suits.