While Californians have counted on pension promises not being rolled back, a state appellate court in August said that benefit cuts are permissible if the pensions remain "reasonable" for workers, Bloomberg News reported yesterday. The Marin Association of Public Employees, which lost its lawsuit seeking to prevent the county from reducing the final salary levels used to calculate pension payments, says that it will ask the state’s Supreme Court to overturn the ruling. If upheld, it would give California and its local governments a way to cut costs just as lackluster investment returns threaten to leave them under pressure to pump more money into retirement plans. Efforts to reduce retirement expenses have focused on steps such as steering new employees into 401(k)-style plans or persuading unions to consent to measures such as increasing retirement ages or cutting cost-of-living adjustments. While the California court case has no impact beyond the state, it could inspire challenges elsewhere by local governments seeking to push through changes over the objections of workers. "Courts around the country faced with similar litigation would likely hold in a similar fashion," wrote Bank of America Merrill Lynch analysts led by Philip Fischer in a note to clients.
