Vested rights
This article does not receive scheduled updates. If you would like to help our coverage grow, consider donating to Ballotpedia. Contact our team to suggest an update.
| Voting on Local Pensions |
|---|
 |
| Local Ballot Measures |
| By state |
| By year |
| Hotspots Reports |
| Most recent edition |
| Original Case study |
| San Jose & San Diego |
| State-wide Measures |
A vested right generally is a right that is unconditionally secure and does not rely or depend on any event or circumstance. The term and corresponding doctrine is often used in the legal and financial world surrounding defined benefit pension plans, which are typical of public pension systems. Vested rights doctrine with regard to these pensions, which is the standard legal interpretation common today, especially of the California Constitution, expresses the position that when an employee is hired by an employer, the pension plan offered by the employer at the time of hire is a vested rights. This plays out in two ways, according to different interpretations:
1.) The specific plan offered the employee at hire is a right and the benefits offered cannot be changed or denied for any reason.
2.) The benefits that have been earned by an employee's already completed work are an undeniable right, but the pension benefits earned for future work can be changed.
Another argument based on the vested rights doctrine as applied to pensions is that pension debt and payments are impervious to chapter nine bankruptcy, filed by such cities as Detroit, Stockton and San Bernardino. The United States Supreme Court stated that a defined benefit plan “is one where the employee, upon retirement, is entitled to a fixed periodic payment. The asset pool [available to pay benefits] may be funded by employer or employee contributions, or a combination of both. But the employer typically bears the entire investment risk and … must cover any underfunding as the result of a shortfall that may occur from the plan’s investments.” The effect of under-performing investments and the fallout of short-changed pension funds is to transfer the responsibility of ailing pension funds and massive interest payments on even larger pension debt to the taxpayers, who ultimately constitute the "employer" of public workers.[1]
California
The California Constitution, Article 1, section 10, reads, “A … law impairing the obligation of contracts may not be passed.” This is commonly called the "contract clause" and has been used to establish a fairly strict "vested rights" doctrine in the Golden State. CalPERS describes this doctrine thus: “A public employee’s pension constitutes an element of compensation, and a vested contractual right to pension benefits accrues upon acceptance of employment. Such a pension right may not be destroyed, once vested, without impairing a contractual obligation of the employing public entity.”[1]
See also
External links
Footnotes
