Appeals Court Upholds CalPERS Board Decision to Reject Ex-Vallejo City Manager Attempt to Spike Pension by More Than $1 Million
June 29, 2016
Communications & Stakeholder Relations
Brad W. Pacheco, Deputy Executive Officer
Wayne Davis, Chief, Office of Public Affairs
Contact: Amy Morgan, Information Officer
SACRAMENTO, CA - In an opinion issued yesterday, a California Court of Appeal ended a more than 4-year battle to reject an attempt by the former City Manager of Vallejo, Joseph Tanner, to spike his pension by more than $1 million.
This decision of the Court of Appeal for the Third Appellate District upholds the California Public Employees' Retirement System (CalPERS) Board of Administration's original decision to reject Tanner's agreement with the City of Vallejo to convert nearly $90,000 of non-salaried compensation into salary and thereby increase his eventual pension by over $1 million. The Court's primary reason for its decision was that the higher level of compensation was never disclosed on a publicly-available pay schedule.
"We're obviously pleased with the decision," said Matthew Jacobs, CalPERS' General Counsel. "This was a blatant attempt to evade the laws against pension-spiking, and the Court recognized it as such. We're gratified that our efforts to root out this kind of abuse are bearing fruit."
In late 2006, Tanner entered into a written agreement with the City of Vallejo to serve as a city manager for a 3-year term. The agreement provided Tanner an annual base salary of $216,000, plus other certain types of compensation, including an automobile allowance, a deferred compensation plan, and 12 weeks of leave.
CalPERS reviewed the contract in January 2007 and notified Tanner that only the base salary would qualify as compensation toward his pension. In March 2007, the City and Tanner replaced the original contract with one that increased Tanner's base salary to $305,844 and dropped the other types of compensation.
Two years later, on June 2, 2009, Tanner retired and claimed a pension based on the higher figure. CalPERS rejected Tanner's claim, and calculated his pension based on the lower, original figure instead.
Tanner appealed the decision to an administrative law judge (ALJ), who sided with CalPERS in a lengthy opinion issued in 2012. The CalPERS Board adopted the ALJ's decision in February 2013, and Tanner sued to overturn it. The Sacramento Superior Court rejected Tanner's lawsuit and issued a decision in January 2015, and on June 28, 2016, the Court of Appeal affirmed this decision.
Currently, Tanner receives a monthly pension amount of $16,091.18 (gross).
CalPERS discovers and pursues violations of the retirement law through all means available, including audits and tips from the public to our Ethics Helpline. In Fiscal Year 2014-15, CalPERS completed 125 audits of contracting public agencies and received 180 complaints from our Ethics Helpline.
Read more background in the 2012 Administrative Law Judge decision (PDF); and the February 2013 decision of the CalPERS Board (PDF).
For more than eight decades, CalPERS has built retirement and health security for state, school, and public agency members who invest their lifework in public service. Our pension fund serves more than 1.8 million members in the CalPERS retirement system and administers benefits for nearly 1.4 million members and their families in our health program, making us the largest defined-benefit public pension in the U.S. CalPERS' total fund market value currently stands at approximately $287 billion. For more information, visit www.calpers.ca.gov.
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