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How the state supreme court’s decision on the so-called ‘California rule’ impacts you

A woman walks into the State of California Earl Warren building Jan. 22, 2007, in San Francisco, California
A woman walks into the State of California Earl Warren building Jan. 22, 2007, in San Francisco, California
Justin Sullivan/Getty Images

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The California Supreme Court on Monday upheld a decision by state lawmakers to roll back one way for public workers to pad their pensions, but avoided ruling on the larger issue of whether retirement benefits can be taken away once promised.

At issue in the unanimous decision was a provision of a 2012 pension reform law that ended the ability of public workers to pay for more years of service for a more lucrative pension when they retire. The law, backed by former Gov. Jerry Brown, sought to rein in costs and end practices viewed as abuses of the system.

Attorneys for a union argued that the elimination of additional retirement service credits violated a long line of California court rulings that have made pension benefits for existing employees sacrosanct. Those court decisions established the “California Rule,” which says workers enter a contract with their employer on their first day of work that entitles them to retirement benefits that can never be diminished unless replaced with similar benefits.

Critics of the rule, along with employee unions, were keeping a close eye on the case because it had the potential to upend the California Rule. But the justices sidestepped the issue by ruling that additional retirement service credits were not “core pension rights” that lawmakers were contractually bound to honor.

The justices are considering several other pension cases, so they may address the California Rule in another case.

With files from the Associated Press

With guest host Libby Denkmann


Randy Diamond, writer for Chief Investment Officer, an investment news, opinion and research site, where he covers CalPERS and CalSTRS