Why must government employers be particularly careful when designing their retirement and welfare plans?
California governmental employers are prohibited from impairing the contract rights of public employees to their retirement and certain other benefits. The California Supreme Court and other courts in California, as well as the applicable state agencies, have interpreted this constitutional requirement as prohibiting a governmental employer, in most cases, from reducing or eliminating the most valuable benefit that is offered at any time during an employee’s public employment. However, the full impact of this requirement can be avoided, and a governmental entity’s flexibility to amend or terminate its benefits can be preserved, if certain legal steps are taken as early as possible.