Update on Supreme Court Opinion: Notice to Members

Article August 21, 2020

This notice concerns amendments to SCERS’ Final Compensation Review Policy that could impact the calculation of your retirement allowance.

If you have recently submitted or are considering submitting a retirement application, please consider how the following information described below may influence your retirement plans, including withdrawing or delaying your application.

On July 30, 2020, the California Supreme Court issued a decision in the case of Alameda County Deputy Sheriffs’ Association et al. v. Alameda County Employees’ Retirement Association and Board of Retirement of ACERA (“Alameda”). That decision has important implications for the Sacramento County Employees’ Retirement System and its members. Foremost, the Court upheld the constitutionality of certain amendments the Legislature made to the County Employees’ Retirement Law of 1937. Those amendments, now approved by the Court, require county pension systems to exclude the following pay items from a member’s “compensation earnable”:

“Payments for unused vacation, annual leave, personal leave, sick leave, or compensatory time off, however denominated, whether paid in a lump sum or otherwise, in an amount that exceeds that which may be earned and payable in each 12-month period during the final average salary period, regardless of when reported or paid” (Gov. Code 31461(b)(2));
“Payments for additional services rendered outside of normal working hours, whether paid in a lump sum or otherwise” (Gov. Code 31461(b)(3)).

At the August 19, 2020 meeting of the Board of Retirement, the Board received a presentation about the Alameda opinion and decision points for the Board to consider in implementing that opinion. (Materials from the presentation can be found here.) In particular, SCERS must now reconsider, and potentially exclude, some pay items SCERS has historically treated as pensionable for Legacy members (generally those employees who were members of a public retirement system before 2013), including:

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

At its September 16, 2020 meeting, the Board of Retirement took formal action to exclude the above pay items as of January 1, 2013 (the effective date of the amendments).

Additionally, the Board revised the effective date of the Compensation Earnable Policy for Overtime, CTO-Expired, and CTO-Over-Max – excluding the portion of differentials, allowances, or other incentives that include overtime or CTO-expired/CTO-over-max as of January 1, 2013.

If you (1) relied, or plan to rely, on any of those pay items in calculating your retirement allowance, and (2) retired, or plan to retire, on or after January 1, 2013, your retirement allowance could be affected.

Additional information will be provided as it becomes available. Please contact SCERS at (916) 874-9119 or sacretire@saccounty.net with questions.

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Alameda implementation update – 10/2/2020

Members who recently retired or are in the process of retiring
- SCERS staff is ensuring that new retirement calculations exclude the pay items affected by the Alameda decision. Members will receive a separate notice if their pension was impacted. Contribution refunds will be processed at a later time.
Current employees
- Sacramento County is in the process of reprogramming its payroll system to stop deducting retirement contributions from the excluded pay items. However, the payroll changes will not likely take effect until January 2021.
- SCERS is working with Sacramento County to identify current and non-retired, former employees who overpaid contributions on the excluded items since January 1, 2013; SCERS will refund those contributions, with the goal of processing most refunds in December 2020.
Members who retired on or after January 1, 2013 – SCERS is still analyzing the retirees who are impacted by the court ruling, with the goal of making pension adjustments by the January 2021 payment cycle.