PURPOSE

The purpose of this policy is to establish that service credit cannot exceed one (1) year in a 12-month period.

POLICY

The number of hours worked by SCERS members during a normal/scheduled workweek varies by different job classification, bargaining unit, and/or worksite. Regardless, the service credit accrued or available for a normal, scheduled workweek is referred to as “regular service” and excludes overtime. One (1) year of service credit shall reflect the regular, full-time hours worked under a particular work schedule for that year. Service credit cannot exceed one (1) year in a single calendar year or other 12-month period.

EFFECTIVE DATE

Beginning with the pay period commencing on or after April 28, 2019, SCERS will limit service credit to one (1) year in a 12-month period.

APPLICATION

Regular service at SCERS is benchmarked to a standard schedule of 40 hours per week, or 80 hours per biweekly pay period. Accordingly, those members who work a standard schedule can expect to accrue one year of service credit by working 40 hours per week for 52 weeks (and making all the contributions required of full-time employees).

Members who work any full-time, alternate schedule that is more or less than 40 hours per week can also expect to accrue one year of service credit by working that alternate schedule for 52 weeks (and making all the contributions required of full-time employees).

For example, members who work a 7/12 schedule (the equivalent of 84 hours per biweekly pay period) can accrue one year of service credit by working that schedule for 52 weeks. Service credit under the 7/12 schedule cannot exceed one (1) year.

If a member works a full-time, standard schedule for part of a year and also works a full-time, alternate schedule for the other part of year, the member will receive one (1) year of service credit.

After this policy is adopted by the Board of Retirement and goes into effect, SCERS will not allow or recognize service accruals in excess of one (1) year for any calendar year or other 12-month period.

BACKGROUND

In accordance with Board policy adopted in August 1999, SCERS has been crediting additional service to members who work under a 7/12 schedule. Under the policy, these members have been able to earn more than one year of service credit for each year of service. The SCERS Board has concluded that this administrative practice should be discontinued prospectively. This policy supersedes the Board action on August 19, 1999, that authorized additional service credit for 7/12 schedules, and applies to any alternate schedule, for service accrued on or after April 28, 2019.

RESPONSIBILITIES

Executive Owner: Chief Benefits Officer

POLICY HISTORY

Date	Description
10/18/2023	Board amended policy
04/15/2020	Board approved amendment to policy
05/14/2019	Typo corrected in Background section regarding effective date
04/17/2019	Board approved final policy
11/05/2018	Board approved Discussion Draft for comment
08/19/1999	Board approved Agenda Item 8

SCERS Policy No. 026

SCERS Policy on Service Credit FAQs (Updated April 2019)

1.Q. What action did the SCERS Board take?

The SCERS Board approved a discussion draft for a new Service Credit Policy at their regular meeting on November 5, 2018. The Board is considering the policy for final adoption on April 17, 2019.

2.Q. What does the Service Credit Policy do?

The policy limits service credit to one year in a calendar year or other 12-month period, regardless of workweek schedule. The policy is effective for the pay period beginning April 28, 2019.

3.Q. Why is the policy needed?

SCERS staff has concluded that a better interpretation of the state and federal laws that apply to SCERA warrant changing the Board’s policy with respect to that maximum amount of service credit members may accrue in a twelve month period. On that basis, it is recommend a change in policy to the Board.

4.Q. What is changing?

The policy amends an administrative interpretation of CERL that the SCERS Board endorsed in 1999 regarding the 7/12 work schedule for County employees. Persons subject to the 7/12 schedule work seven (7) days of twelve (12) hour shifts over the course of a two-week pay period, for a total of 84 hours. While most employees work an 80-hour biweekly schedule, the SCERS Board agreed to include the additional four hours of the 7/12 schedule as compensation earnable and provide an additional four hours of service credit. This policy discontinues the additional service credit based on the conclusion that a more sound interpretation of CERL and applicable federal tax law permits the accrual of no more than one year of service over a 12-month period. The additional wages a member receives will still count toward his or her Final Compensation.

5.Q. Does the Service Credit Policy create a single or uniform service standard for all members of SCERS?

Yes. In consideration of the the SCERS Board’s revised interpretation of pertinent plan authorities, including the County Employees Retirement Law of 1937 (which applies to SCERS and 19 other county retirement systems) and key provisions of the Internal Revenue Code (which apply to SCERS and all governmental defined benefit plans), the Service Credit Policy sets a maximum rate of service accrual for all members of SCERS. Specifically, the policy states that members may not accrue more than one (1) year of service credit with SCERS in a single calendar year or other 12-month period.

6.Q. Does the Service Credit Policy affect individual service credit earned before the proposed effective date?

No. The maximum accrual rate established by the Service Credit Policy does not go into effect until the pay period beginning April 28, 2019, and it only applies to pay periods beginning on and after that date. All service credit earned under 7/12 schedules up to and including April 27, 2019, will not be affected.

7.Q. Does the Service Credit Policy affect individual contributions to SCERS or the final average salary calculations used to determine pension benefits?

No. The Service Credit Policy does not affect individual contributions or final average salary calculations because it does not modify the compensation earnable identified in Resolution No. 99-08 or any other components of the post-Ventura settlement agreement.

8.Q. Does the Service Credit Policy affect the K-9 Differential?

Yes and no. Compensation earnable attributable to the K-9 differential will not be affected. However, SCERS has identified a COMPASS payroll programming decision made several years ago regarding the K-9 differential that affects service credit. The COMPASS system provides an additional 10 service-credit hours a month to those safety members receiving the K-9 differential. Providing 10 service-credit hours a month has the effect of providing more than a year of service credit in a one-year period. While the SCERS Board has previously affirmed the inclusion of the K-9 differential pay in compensation earnable and pensionable compensation, the SCERS Board has never approved an alternate service-credit methodology regarding the K-9 differential. By limiting service credit to one year, this policy effectively discontinues additional service credit for K-9 officers, effective April 28, 2019.

Additional Information - August 30, 2023

SCERS’ Treatment of Service Credit Prior to April 28, 2019

This statement is being provided to members who work 7/12 work schedules to clarify any misunderstanding or miscommunication regarding the SCERS’ Service Credit Policy.

SCERS calculates service credit based on work schedules reported by the employer and according to the Service Credit Policy adopted by the Board April 17, 2019. Prior to April 2019, members were credited with additional service credit for compensated time worked beyond 80 hours according to normal full-time work schedules in a bi-weekly pay period. As a result, members were able to earn slightly more than one year of service credit for each year of compensated service.

Beginning with pay periods commencing on or after April 28, 2019, members who work alternate full-time schedules such as 7/12, accrue no more than one year of service credit by working that schedule in a 12-month period. This limit was prospective beginning with the pay periods commencing on or after April 28, 2019, aligning with the adoption of the Service Credit Policy.

At the time of the policy implementation, all service credit was captured and recognized by SCERS for retirement calculation purposes; no adjustments prior to April 28, 2019, pay period have been made by SCERS staff when calculating retirement benefits.

Please note that there may have been circumstances in which the 81st to 84th hours in certain pay periods were not included as additional service credit prior to April 28, 2019, if the hours worked were captured as Compensatory Time Off (CTO) when it was accrued. CTO time is not eligible for additional service credit and has never been treated as retirement applicable. This practice was not changed by the SCERS’ Service Credit Policy in 2019.

Finally, on April 14, 2023, the Sacramento County Superior Court issued the final ruling in Sacramento County Deputy Sheriffs’ Association v. Sacramento County Employees’ Retirement System, et al., resolving all disputed issues in SCERS’ favor. The lawsuit was filed in 2019 following SCERS’ adoption and implementation of several policies that clarified how pensions are calculated, including prospective limitation of service credit to one year of credit for one year of work for those on a 7/12 work schedule.

Eric Stern
Chief Executive Officer