Mijares v. Orange Cnty. Employees' Ret. Sys.
243 Cal. Rptr. 3d 728
| Cal. Ct. App. 5th | 2019Background
- Orange County Dept. of Education (Employer) began as part of Orange County Employee Retirement System (County Retirement System); a 1977 transfer let educational employees choose CalPERS or remain in the County system; a small number stayed.
- Employer paid contributions comprising (1) a normal contribution (percent of payroll) and (2) an unfunded actuarial accrued liability (Unfunded Liability). The last participating employee retired in March 2013, and Employer stopped contributions.
- In 2015 the County Retirement System adopted a Declining Employer Payroll Policy (2015 Policy) allocating Unfunded Liability to employers with declining payroll; it told Employer it owed ~$3.3 million attributable to 22 retired members and proposed a payment schedule.
- Employer sued for declaratory relief, claiming the 2015 Policy was retroactive and unlawful; County Retirement System cross-complained seeking a declaration that Employer must pay monthly amortized amounts.
- The trial court granted the County Retirement System’s motion for judgment on the pleadings; the court of appeal affirmed, holding the System had authority to assess the Unfunded Liability and the assessment was not impermissibly retroactive.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 2015 Policy impermissibly imposed a retroactive liability | Employer: Policy retroactively increased Employer’s liability from zero to $3.3M based on events decades earlier | County Retirement System: Unfunded Liability is prospective actuarial shortfall, not a retroactive debt; actuarial adjustments are forward-looking | Held: No retroactivity — the Unfunded Liability is prospective actuarial adjustment and assessment two years after last retirement is not retroactive |
| Whether statutory authority permits assessing Unfunded Liability against an "inactive" employer | Employer: Section 31453.5 applies only to "ongoing employers" (payroll-based); §31564.2 covers only formally withdrawn employers, so a statutory gap exists for inactive employers | County Retirement System: §31453.5 (and plenary constitutional authority) grants broad power to determine contributions and amortize deficits; payroll-methodology is permissive, not limiting | Held: System had authority under §31453.5 and constitutional plenary power to assess and amortize Unfunded Liability for employers with retired members |
| Whether the court erred by granting judgment on pleadings without discovery/leave to amend | Employer: Needed discovery to show disparate treatment of similarly situated inactive employers (due process/equal protection) | County Retirement System: Employer did not request continuance or discovery below; arguments and facts now asserted were waived | Held: No abuse — Employer failed to seek discovery or leave to amend below; appellate claims on new factual theories waived |
| Standard of review for judgment on the pleadings | Employer: urged independent review of legal issues because disposition via JOP | County Retirement System: applied demurrer/JOP standards | Held: Court applied JOP/demurrer standard (treat pleadings as admitting well-pleaded facts) and affirmed on the merits |
Key Cases Cited
- Board of Administration v. Wilson, 52 Cal.App.4th 1109 (discusses public employees’ contractual right to actuarially sound retirement systems)
- County of Orange v. Association of Orange County Deputy Sheriffs, 192 Cal.App.4th 21 (explains pension board's plenary authority and actuarial responsibility)
- In re Retirement Cases, 110 Cal.App.4th 426 (addresses contribution-rate setting and actuarial valuations)
- County of Alameda v. Board of Retirement, 46 Cal.3d 902 (describes funding sources and employer obligations under Retirement Law)
- Baughman v. State of California, 38 Cal.App.4th 182 (standard of review for JOP akin to demurrer)
- City of Oakland v. Public Employees' Retirement System, 95 Cal.App.4th 29 (notes contribution rates are set by law)
- Irvin v. Contra Costa County Employees' Retirement Assn., 13 Cal.App.5th 162 (pension statutes construed liberally in favor of beneficiaries)
- City of San Diego v. San Diego City Employees' Retirement System, 186 Cal.App.4th 69 (context on constitutional protections for retirement boards)