The planning director of a Southern California government agency was struggling to communicate clearly with her staff or constructively criticize them in her last year on the job.

Nonetheless, her boss gave her an overall performance rating of “very successful,” citing her expertise and hard work. The director, Huasha Liu, of the Southern California Association of Governments, received a $10,000 bonus.

The bonus is at the center of a lawsuit Liu filed recently against the California Public Employees’ Retirement System in Los Angeles County Superior Court. After she retired, CalPERS determined the bonus wasn’t pensionable and reduced Liu’s pension by about $10,000 per year, to about $93,000 per year, according to the lawsuit and CalPERS.

California retirement law says bonuses paid for “superior performance” are pensionable. A CalPERS analyst determined Liu’s performance didn’t meet that standard, citing her shortcomings as a manager and the fact that her performance rating dropped from the year prior.

Liu’s lawsuit challenges that decision by CalPERS and takes issue with a broader policy change the retirement system also cited in reducing her pension.

Liu’s $208,000 salary was the maximum allowed for her position. Since her salary was maxed out, she couldn’t get a raise after her review and got the bonus instead.

For about 10 years, CalPERS counted those types of bonuses — paid in lieu of raises to employees at the top of their pay scales — as pensionable. In 2017, CalPERS changed course in a way that could have broad implications for public employees in California.

The state’s retirement law says that for any kind of special compensation to be pensionable, including bonuses, they must be available to all members of a group or class. CalPERS decided in 2017 that bonuses paid to employees with maxed-out salaries, since they aren’t available to lower-paid employees, don’t meet that requirement.

Liu’s lawsuit challenges that change, arguing it violates the California Rule, a set of legal precedents that prevents reductions to public pensions without offsetting compensation.

Her lawsuit seeks class action certification for that claim, arguing that more than 50 other people who work at the Southern California Association of Governments may be in a similar situation. The association develops long-term plans related to transportation, housing and air quality for a six-county area, according to the lawsuit. It employs about 130 people. Liu started work as a planning director there in 1999.

Her attorneys believe that potentially thousands of other public employees at the top of their salary scales could be affected by CalPERS’ policy change.

“Many people will reach that stage before they retire, and they’re going to be among the people penalized under this policy change,” said Brian Olney, an attorney from Pasadena-based firm Hadsell Stormer Renick and Dai who is representing Liu in the lawsuit along with Los Angeles-based attorney Lisa Holder.

Liu filed the lawsuit after an administrative law judge and the CalPERS Board of Administration rejected her arguments.

“The plaintiff, Ms. Liu, pled her case to an administrative law judge and lost,” CalPERS Chief Counsel Matthew Jacobs said in an emailed statement. “The judge agreed with CalPERS that her generous pension (based on her $207,693 salary) shouldn’t be increased for ‘superior performance’ because her performance wasn’t actually superior. The judge also agreed with CalPERS that Ms. Liu’s bonus couldn’t be used to calculate her pension because it wasn’t available to all members in a group or class, in violation of California pension law.”

Administrative Law Judge Erlinda Shrenger said in her decision that CalPERS is allowed to change its interpretation of a law, citing a 2017 Court of Appeals ruling in a separate case.

In her performance review, Liu received a rating of about 3.7 out of 5, which put her in the “very successful” category in a corresponding grid, according to her lawsuit.

Her rating dropped from the prior year, and her reviewer said she had “not demonstrated significant progress” in developing “project management abilities,” according to the review, which was cited in the judge’s decision.

Her boss also said Liu had “often (done) a good job at taking the initiative” on projects and communicating with officials from other organizations.

CalPERS has not yet filed an official response to the lawsuit, which was filed in September and announced this week.

This story was originally published January 10, 2020 at 5:30 AM with the headline "She says her pension should be bigger. CalPERS says she was a bad boss."