Q&A regarding member notice on Supreme Court ruling/Final Compensation

When will the Board take action?

The Board took action on September 16 to comply with the Alameda ruling.  Board materials can be found here.

Which pay items are now excluded?

• Standby Pay
• Vacation Cash-In that exceeds what can be earned and paid in each 12-month period, whether calendar year or fiscal year
• Animal Allowance, for Legacy and PEPRA (post-2013) members
• Insurance subsidy offset, paid to County employees in January of each year to refund over-collected taxes for employees who reached the Social Security earnings limit
• The portion of differentials, allowances, or other incentives that include overtime or CTO-expired/CTO-over-max (amending the effective date of the Compensation Earnable Policy for Overtime, CTO-Expired, and CTO-Over-Max to January 1, 2013)

If I sold back vacation time, will that still count toward my pension?

Vacation sell back that does not exceed what can be earned and paid in each 12-month period is permitted for Legacy members (generally pre-2013 membership).  For example, if your employer allows you to sell back up to 40 hours of vacation annually, that compensation is generally included for pension calculations.  However, vacation sell-back that straddles years, and exceeds what can be earned and paid in each 12-month period, is excluded. For example, selling back 40 hours of vacation in December, then selling back an additional 40 hours the next month in January (which would double count the vacation sell-back over a 12-month period) would not be permitted; only the compensation received for selling back the first 40 hours of the 12-month period would be considered applicable for retirement.

Is my unused sick leave affected?

No.  Unused sick leave hours are converted into service credit at retirement.  The Court decision does not change that.

Will my pension be affected for the pay I received for unused vacation after I terminated?

No. Terminal payments for unused vacation have never been included in SCERS pension calculations.  The Court decision does not change that.

If I retired before 2013, will my pension be affected?

Based on the court ruling, the Board is only considering action for SCERS members who retired, or will retire, on and after January 1, 2013. 

If I retired after 2013, will my pension be affected?

Potentially, yes.

If the Board reduces my pension, will the Board collect back pension payments I already received?

The Board determined that it will refrain from recouping overpayments from retirees that occurred prior to the August 31 payroll, unless ordered to do so by the Internal Revenue Service and/or a final, non-appealable, order of a court of competent jurisdiction; SCERS will correct the overpayments by reconciling employer contributions through the actuarial valuation process.

Will SCERS refund contributions I made if the Board removes pay items?

The Board determined that SCERS will return contributions to active and deferred members plus interest earnings that were collected on newly excluded items from January 1, 2013 forward.  For retired members, SCERS will refund over-collected member contributions plus interest earnings retroactive to January 1, 2013, to the extent the value of such exceeds the marginal increase in retirement allowances the member received from overpaid benefits. 

If I move up my retirement date and retire before the September 16^th meeting, will I still be affected?

Yes.  The Board is considering action on pay items earned after January 1, 2013.

I am planning to retire soon and am concerned that these changes might reduce my pension.  What should I do?

You need to consider how these changes will affect your retirement planning, including deciding if you should delay your retirement.  A SCERS retirement benefits specialist can work with you on estimating the impact of the potential changes.

Will the Board’s action affect the income I received or will receive for these pay items?

No. The Board’s decisions will only affect the amount of compensation that will be included for calculating your pension.

Why did I receive a letter from SCERS about this issue if my pension is not impacted by the court ruling?

SCERS mailed a notice in late August to all members (active, deferred, and retired – regardless of retirement date) out of an abundance of caution to ensure that all members were made aware of this issue in a timely manner.  SCERS has not yet identified the specific members who will be affected; however, as SCERS implements the court directives, members will be contacted individually about any impact on their retirement allowance.

If I am impacted by this change and already retired, can I change the Final Average Salary period used to calculate my pension?

Generally yes, to the extent the new Final Average Salary period (one or three years, as applicable) also excludes the disallowed pay items.

If I am impacted by the change and my pension is now lower than I expected, can I un-retire and return to work?

There is no restriction on un-retiring and reinstating into active service to continue earning service credit and additional compensation, though the hiring process is between the employer and the employee. If you reinstate, your pension will be suspended and recalculated when you subsequently retire to factor in the pension benefits that were previously paid out.

Do corrections cover the period before January 1, 2013?

Generally no, except in the situation where a member retires after January 1, 2013, but the Final Average Salary period (one or three years, as applicable) occurs in part or in whole before January 1, 2013.

When will I be notified about the specific adjustment that SCERS will make and when will it happen?

SCERS is still analyzing the impacted population and the process to make the corrections. We will post all updates regarding the overall process to the SCERS website as they are made available.

What happens to the retirement contributions that were made on the new exclusions before January 1, 2013?

In a pooled-risk pension plan, members often make contributions on pensionable pay items at certain points of their careers that ultimately are not used toward Final Compensation. The pay elements at issue under the Alameda ruling were retirement applicable before January 1, 2013, and required SCERS to include the compensation in pension calculations for members who retired before that date.  Therefore, contributions made before January 1, 2013 will not be returned to members or distributed from the SCERS trust except in the form of the annuity that pays for the member’s retirement allowance – unless the member subsequently terminates employment and requests a full “refund” of contributions and interest from SCERS.

Has the SCERS benefit calculator been updated to reflect the changes?

No.  If you are planning to retire soon, please contact a SCERS retirement benefits specialist for help estimating your benefit.

How can I get more information?

The SCERS website has more information about the Supreme Court case and Board agenda materials related to this issue.