MEA and City Reach Tentative Agreement on “Make Whole” Remedy For Active Prop B Employees

We are pleased to report that MEA has reached a Tentative Agreement with the City over the implementation of a “make whole” remedy for active Prop B employees now that we achieved a court order invalidating Prop B and ordering the City to strike it from the City Charter.  This agreement comes almost exactly 10 years after MEA filed its unfair labor charge against the City and began its decade-long battle to challenge and undo Prop B as the City’s illegal ballot measure directed at changing pension rights without bargaining.

As previewed by MEA Attorney Ann Smith in our October 13 Eblast on this subject, the agreement reached with the City provides affected active MEA-represented Prop B employees with a complete restoration of the defined benefit pension rights they were denied when hired between July 19, 2012 and July 10, 2021 as a result of the City’s violation of the law.  And it does so on terms that are both highly favorable to employees and fully consistent with the Court-approved remedial order entered in the case by the Public Employment Relations Board.

This Eblast is intended to alert you that an agreement has been reached.  It is not intended as a summary of every provision of the agreement.  You will have ample time to get acquainted with every aspect of the agreement which calls for a 3-month education and information period beginning on February 1, followed by a 60-day election period to enroll in SDCERS on or before June 30, 2022.  While not a substitute for the full agreement, here are a few important highlights:

• Every affected active Prop B employee (hired between July 19, 2012 and July 10, 2021) will have the opportunity to participate in the “make whole” remedy and be placed into the City’s defined benefit pension system (SDCERS) for all years worked in an eligible standard hours position just as if Prop B had never happened.
• In accord with PERB’s Remedial Order, the City will owe SDCERS for all missed Employer Normal Cost contributions for the years missed and any unfunded actuarial liability for those years.  The City will use the contributions it made on an employee’s behalf to the SPSP-H Employer Contribution Account and investment earnings on that account to help pay this bill to SDCERS.  Nevertheless, this will be a big bill for the City.
• Employees will use their SPSP-H Employee Contribution Account and investment earnings on that account to pay the cost they would have paid into SDCERS during the years they were excluded, with SDCERS’ assumed interest added.
• If an employee does not have enough funds in their SPSP-H Employee Contribution account to cover this missed Employee cost, the City will pay the difference on behalf of the employee.  No employee will be required to come “out of pocket” (beyond their SPSP-H account) to be fully restored in the pension system for all missed years of eligible service.
• If an employee has more money in their SPSP-H Employee Contribution Account than is needed to cover the SDCERS cost for missed prior service credit, the employee will keep their excess SPSP-H funds on deposit in their SPSP-H account.
• Every dollar of SPSP-H funds moved to SDCERS to purchase missed service credit – whether from the Employer or the Employee Contribution Account will remain 100% vested in the employee’s name once on deposit with SDCERS.  In the event the employee separates from the City and decides to withdraw or rollover their pension funds, the employee would be guaranteed the return of these 100% vested funds (formerly in SPSP-H) with additional interest added at SDCERS’ assumed rate.
• Active affected Prop B employees who accept the “make whole” remedy under this agreement by enrolling in SDCERS during the election period will also receive a taxable “penalty” payment from the City in late September 2022 after all affected employees’ missed service credit has been fully funded with SDCERS.  This penalty will be calculated under an agreed formula and will vary in amount depending on the number of years the affected employee had been unlawfully excluded from the defined benefit pension plan.
• Employees who do not wish to enroll in the SDCERS defined benefit plan will have the right to waive the negotiated “make whole” remedy and remain instead in the SPSP-H defined contribution plan on terms which will be amended to comply with tax laws.  Employees who make this voluntary election to waive the make whole remedy will not be eligible for the penalty payment.  There also will be no disability or death benefit available to those who elect to remain in the SPSP-H plan because it is a defined contribution plan and these benefits are offered only as part of the SDCERS defined benefit plan.

As mentioned above, employees will have ample time to receive more information about their rights under this agreement before making their final decision.  Here are the key dates:

• Next week, the City Council will approve this Tentative Agreement in an open session meeting.
• On February 1, a 3-month information/education period will begin.  Meeting opportunities and the availability of City-paid release time to participate will be publicized once the schedule is ready.
• On May 1, a 60-day election period will begin to allow employees time to make an irrevocable election on or before June 30^th either to enroll in the SDCERS defined benefit pension system or remain in the SPSP-H Plan as amended.
• On July 9, formal enrollment in SDCERS will begin for current active Prop B affected employees who make this election.
• On or before September 22, a (taxable) penalty payment will be made to those active Prop B affected employees who enrolled in SDCERS before the June 30^th deadline.

This Tentative Agreement represents a complete victory for MEA-represented employees affected by Prop B by achieving a full “make whole” remedy – plus a City-paid penalty – in accordance with PERB’s court-approved remedial order.  While the 2018 unanimous California Supreme Court decision MEA achieved in this case is a landmark victory in enforcing the state’s collective bargaining law for ALL public employees in California, this “make whole” result was only made possible by the invalidation judgment we achieved last January in the Superior Court.  This is the final WIN for affected MEA-represented employees because it restores them to the defined benefit pensions they would have been earning over the past decade if the City had not violated the law.

MEA wishes to thank Ann Smith once again for her relentless and amazing work on this litigation over the last decade.  Simply put, this result would never have happened without her.  In addition, as Ann herself recently reminded your MEA Board, her legal efforts would not have been possible if it were not for the commitment MEA’s leadership made in 2012 — and at every critical juncture thereafter – to support and fund this litigation to assure that the City’s violation of the law was effectively challenged.  This decision was made by MEA leaders who were not themselves affected by Prop B but understood why this was a vital mission for this Union.  Over the decade it has taken to WIN this fight, more than 2,000 current MEA-represented employees ARE affected by Prop B.

As summarized above, please stay tuned for more information coming soon.  And in the meantime, congratulations and stay well!