Alameda Case Update #2 - September 21, 2020
At its Board meeting on Wednesday, September 16, 2020, the ICERS Board of Retirement adopted Resolution 2020-2, which addressed the outstanding issues identified by the Board in its prior resolution 2020-1 dated August 19, 2020 (See Alameda Case Update #1). In Resolution 2020-2, the Board first confirmed its prior determination that as of July 30, 2020, in compliance with the Supreme Court’s ruling, items of terminal pay (vacation, comp-holiday and administrative leave cash-outs) shall no longer be included by ICERS in Compensation Earnable in the calculation of retirement allowances for Tier 1 and 2 active members, which the Board will communicate to ICERS participating employers and members.
Resolution 2020-2 additionally provides that unless otherwise directed by future court ruling or upon the advice of tax counsel regarding the application of the Internal Revenue Code, the exclusion of terminal pay from Compensation Earnable shall be prospective only from July 30, 2020 and not retroactive in application, and that unless otherwise directed by future court ruling or upon the advice of tax counsel regarding the application of the Internal Revenue Code, collection of the overpayment of benefits and/or the refund of member contributions with respect to terminal pay shall not be made to active Tier 1 and 2 members.
Resolution 2020-2 further provides with respect to on-call duty pay that such pay items that are “mandatory” as scheduled by management pursuant to a MOU or to an employment resolution, in which all members working in the same grade or class of positions are scheduled approximately the same number of on-call hours in a set period of time, shall not be excluded from compensation earnable or pensionable compensation. The Board will review all on-call duty pay items, from January 1, 2013 to the present and determine whether any on-call duty items are “voluntary” in that the member volunteers for on-call duty and whether the number of the member’s on-call duty hours is significantly different from what other similarly situated employees in a grade or class of positions are scheduled, and any such pay items shall be excluded from Compensation Earnable or Pensionable Compensation.
In the event that any “voluntary” on-call duty pay items are identified that must be excluded from Compensation Earnable or Pensionable Compensation from January 1, 2013 to the present, the Board will take further steps on the advice of tax counsel regarding the manner of correcting any identified overpayment of retirement benefits or over-collected member contributions errors in accordance with the requirements under the Internal Revenue Code, and will provide appropriate communication with ICERS participating employers and members regarding such “voluntary” on-call duty pay items identified.
The Board further determined that this Resolution is effective as of September 16, 2020 and supersedes previous ICERS Board resolutions for employer pay codes of employee compensation.
Alameda Case Update #1 - August 21, 2020
At its Board meeting on Wednesday, August 19, 2020, the ICERS Board of Retirement adopted a resolution that addresses in part the California Supreme Court’s decision issued on July 30, 2020 in the case of Alameda County Deputy Sheriffs’ Association, et al, v. Alameda County Employees Retirement Association,et al. The resolution adopted by the Board recognized that the Court’s opinion constituted a conclusive interpretation of the provision of the County Employees Retirement Law (CERL) definition of “compensation earnable) set forth in Government Code section 31461 that was binding on ICERS. The Board’s resolution provides that as a result of the Court’s opinion, effective July 30, 2020,items of “terminal pay,” (i.e., vacation, comp holiday and administrative leave cash-outs) shall no longer be included by ICERS in compensation earnable in the calculation of retirement allowances.
The Board's resolution also preliminarily addressed the issue of call-back/standby pay by directing ICERS’ staff, together with outside General Counsel and Fiduciary Counsel, to evaluate existing memoranda of understanding and other County personnel rules and guidelines providing for call-back/standby pay and make recommendations to the ICERS Board regarding their continued inclusion or exclusion from compensation earnable in the calculation of retirement allowances.
Finally, the Board's resolution directs ICERS staff, together with its Outside General Counsel, Fiduciary Counsel, and such other attorneys and consultants as may be required, to evaluate and make recommendations to the ICERS Board regarding the necessary corrective actions to be taken by ICERS in order to implement the above actions, and that such recommendations must be designed to ensure that the Board’s fiduciary duties to its Members, Beneficiaries and Retirees are fulfilled, including the Board’s duty to administer ICERS in accordance with CERL. These recommendations are to be brought back at the earliest possible time that allows for a comprehensive, prudent analysis of the relevant legal and factual issues. The Board has been advised that the time frame for its consideration of these additional recommendations will likely be no earlier than its September 16,2020, Regular Meeting and no later than its October 21, 2020 Regular Meeting.
Frequently Asked Questions
Who’s Affected?
Current Retirees (Retired Prior to July 30, 2020): ICERS general and safety retired Members who retired before July 30, 2020 and currently receive retirement benefits based on the inclusion of terminal pay, will not be subject to a reduction in benefits because of the Board’s action unless and/or until a subsequent court decision or opinion of tax counsel based on the Internal Revenue Code directs otherwise.
Current Retirees (Retired on or after July 30, 2020): ICERS general and safety members who retired on or after this date did not have terminal pay included in the calculation of their retirement allowance.
Current Active and Deferred Members—Terminal Pay: ICERS general and safety, active and deferred Members who did not retire before July 30, 2020 will not have terminal pay included in their compensation earnable for the calculation of their benefit at retirement. If you have an existing retirement estimate prepared by ICERS staff, such estimate will be revised prior to your retirement so as to exclude terminal pay amounts.
Current Retirees and Active and Deferred Members--Call-back/Standby Pay: While ICERS has not completed its review of these pay items back to January 1, 2013, we have completed a significant portion of this review and as of this date we have not identified any instances of such pay that would be required to be excluded from compensation earnable as “voluntary.” If any such instance or instances of pay are subsequently identified, ICERS will consult with counsel regarding the need for corrective action and advise affected participating employers and Members.