May 31, 2012
External Affairs Branch
Robert Udall Glazier, Deputy Executive Officer
Brad Pacheco, Chief, Office of Public Affairs
Contact: Amy Norris, Information Officer
CalPERS Slashes Pension of Former City of Vernon Official
Pension Fund denies membership to other officials
SACRAMENTO, CA – The California Public Employees’ Retirement System (CalPERS) today announced that it plans to reduce the pension of a former City of Vernon top official and deny six other officials all or part of their membership into the Pension Fund or their reported compensation used to calculate their pensions.
CalPERS is taking steps to cut the retirement benefit of former City Administrator Bruce Malkenhorst Sr. from $45,073 per month to $9,654 per month, following an audit CalPERS completed in April 2012. The action marks the largest reduction of a pension in CalPERS history.
CalPERS has preliminarily concluded that the outsized pension Malkenhorst Sr. has received since 2005 was illegally based on unpublished pay rates, overtime and an inflated longevity allowance. In accordance with the Public Employees Retirement Law (PERL), a pension allowance must be calculated on base compensation that is publicly reported, and benefits that are available to all similarly situated employees in the same group or class. Malkenhorst Sr.’s longevity allowance was 5 percent higher than any other City employee. Of the numerous positions Malkenhorst Sr. performed simultaneously at the City of Vernon, the City Clerk position was the only position that had a publicly available pay rate for a single position, and which did not constitute pay for duties in addition to normal duties, or overtime. The most recent and applicable pay rate for this position that CalPERS concluded met the definition of “pay rate” was reported by the City in 2005.
If Malkenhorst Sr. and the City of Vernon cannot provide documentation to prove otherwise, his new final reportable compensation will be $9,450 per month, and his pension will be reduced to $9,654 per month.
“Vernon’s reporting and documentation has failed to comply with the legal requirements necessary to justify these payments,” said CalPERS Chief Executive Officer Anne Stausboll. “It is an affront to the hundreds of thousands of public employees who rely on a modest CalPERS pension for a secure retirement. We fully intend to pursue recovery of all overpayments where we can.”
There is a three-year statute of limitations on collection of overpayments. If Malkenhorst Sr.’s pension is reduced, he will be liable for overpayments within the statutory timeframe.
CalPERS also found that three former employees of the City of Vernon are completely ineligible for CalPERS membership because they worked as independent contractors.
One current and another former employee were found ineligible for some part of service claimed and also have pay rate discrepancies, and another current employee has compensation discrepancies. None of these remaining or former employees has received any pension benefit from the CalPERS system. Any reimbursement and/or credit of contributions made into the system on behalf of the ineligible members for the applicable period will be effectuated in accordance with State and Federal law. Future pensions of those who have some service credit will have to be based on legal and published pay rates. As of now, the City of Vernon has not produced those records.
Determination letters for the impacted members and the complete City of Vernon Audit are available below.
CalPERS is the nation’s largest public pension fund with approximately $225 billion in assets, providing retirement benefits to more than 1.6 million State, public school, and local public agency employees, retirees, and their families, and health benefits to more than 1.3 million members. The average CalPERS pension is $2,332 per month. The average benefit for those who retired in the most recent fiscal year that ended June 30, 2011, is $3,065 per month. For more information about CalPERS, visit www.calpers.ca.gov.
Burnett Letter (PDF, 3 MB)
Fresch Letter (PDF, 4 MB)
Harrison Letter (PDF, 3 MB)
Malkenhorst Jr. Letter (PDF, 3 MB)
Malkenhorst Sr. Letter (PDF, 3 MB)
Olivo Letter (PDF, 3 MB)
Whitworth Letter (PDF, 189 KB)
City of Vernon Audit Report (PDF, 774 KB)