Two retired Davis firefighters want CalPERS to let them keep $70,000 of overpayments to their pensions, arguing the retirement fund should have identified the payments as improper before they retired.

Judi Cutaia and Mark Bills received the overpayments based on an agreement between their union and the City of Davis that let them convert unused health benefits to longevity pay, according to information submitted as part of their case with CalPERS.

The CalPERS board is scheduled to decide at a meeting Wednesday whether to grant the firefighters’ request. The fund’s staff opposes giving the money back, according to board agenda items.

Longevity pay is pensionable under the California Public Employees’ Retirement Law, but the health benefit is not on a list of special types of pay that may increase public pensions.

In 2009, the City of Davis and the Davis Professional Firefighters’ Association negotiated a deal that allowed employees with 25 years of service to convert a portion of unused “cafeteria cash out” payments to longevity pay.

Cafeteria cash outs aren’t related to food — they allow workers to receive cash in lieu of payments toward their health insurance.

Cutaia retired in December 2012 with 29 years of service, according to CalPERS. Bills retired in February 2014 with 29.5 years of service.

Each asked CalPERS to calculate their retirement benefits before they retired, and Cutaia asked for a special review, according to a petition for reconsideration submitted to CalPERS.

In 2016, CalPERS auditors determined the benefit reached between the city and the union wasn’t allowed under California’s retirement law. The fund reduced the payments accordingly and started deducting payments to recoup improper payments of about $28,000 to Bills and about $42,000 to Cutaia, according to the petition.

Bills and Cutaia want those overpayments forgiven. Their petition argues that if anyone must pay back the money, it should be the City of Davis. The petition also asks CalPERS to meet with the city and union to review other firefighters’ pensions before they retire.

“CalPERS made the determination that the longevity pay did not comply with the requirements of the pension law and appellants’ monthly allowances must be markedly reduced,” attorneys for Bills and Cutaia said in the petition. “CalPERS declined to exercise its discretion to forgive the overpayments, despite the tremendous financial hardship which has resulted to both appellants. Consequently, they will literally pay for this, one way or another, for the rest of their lives.”

An administrative law judge sided with CalPERS staff in July. If the CalPERS board decides against repaying the money, Bills and Cutaia would have 30 days to appeal the decision in court.

Attorneys for the two retired firefighters didn’t immediately respond to a request for comment Monday.

This story was originally published November 19, 2019 at 6:00 AM with the headline "Why 2 firefighters say CalPERS should let them keep $70,000 in pension overpayments."