Felony convictions that have a no-contest plea impact retirement benefits being taken away if it applies to a job performance despite it being possibly turned down to a misdemeanor or even dismissed in the future, a recent ruling said.

According to the Human Resources Director Magazine, “This was consistent with the language and purpose of section 7522.72 of California's Government Code, which provided that, if a public employee was convicted of a felony for conduct arising out of or in the performance of their official duties, the employee would forfeit certain accrued retirement benefits. These benefits would remain forfeited despite a reduction in the sentence or an expungement of the conviction.”

For this particular case, the plaintiff was an accountant and a payroll administrator for the city for around  7 years. Eventually, she became eligible for retirement benefits under the California Public Employees' Retirement System (CalPERS) as a member.

They were charged with misappropriation of public funds under section 424(a) of the Penal Code and with embezzlement by a public officer under section 504 of the Penal Code.

The complaint alleged that the plaintiff, who was responsible for the payroll and timekeeping of all the city's employees, removed payroll deductions. As a result, she allegedly did not pay the required employee share for dependents covered on her plan between April 2007 and July 2009, as the city discovered during a 2012 audit.

No-contest plea was given by the plaintiff, and her conviction was reduced to a misdemeanor and eventually later dismissed.

According to HRD Magazine, “The CalPERS notified the plaintiff that she was no longer eligible to return to CalPERS-covered employment or to accrue further CalPERS benefits and that a part of her accrued benefits was subject to forfeiture under section 7522.72 due to her felony conviction.”

The administrative appeal was denied by the judge, and the plaintiff's right to her retirement benefits was from Sept. 1, 2007, the earliest date of the commission of the felony, until June 28, 2017, the date of her conviction.

Upon the request from the plaintiff, the Los Angeles County Superior Court was asked to return her retirement benefits back, with the legal argument that her conviction was reduced to a misdemeanor and even later dismissed.

Trial court had disagreed, resulting in the plaintiff appealing. In the case of Estrada v. Public Employees' Retirement System, the California Court of Appeal for the Second District affirmed the decision of the trial court.

Beginning, the appellate court had ruled that the forfeiture of the plaintiff's retirement benefits came into affect when pled no contest to the felony.

According to HRD Magazine, “Section 7522.72 aims to protect the public employee pension system from abusive practices and to preserve public trust in the government by discouraging serious criminal activity that abuses the public trust, the appellate court noted.”

“Allowing the plaintiff to avoid the partial forfeiture when she admitted felonious conduct in connection with her public employment would go against the purpose of section 7522.72,” the court said.

According to HRD Magazine, “Next, the appellate court held that the retirement benefits remained forfeited despite the reduction of the felony to a misdemeanor and the dismissal of the criminal case. On June 28, 2017, the partial forfeiture requirement of section 7522.72 was triggered when the plaintiff pled no contest to the felony and when the court found her guilty, the appellate court found.”